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A-day - the regulator's role

On 6 April 2006 (A-Day) the Government's pensions tax simplification measures arising from the Finance Act 2004 come into effect. Promoting the good administration of work-based pension schemes is one of the Pensions Regulator's objectives - we are therefore keen to see these tax simplification changes implemented in good time.

Although the Pensions Tax Simplifications proposals have come from Her Majesty's Revenue & Customs (HMRC), as part of our proactive approach we have talked to people in the pensions industry - including trustees, providers and professionals - about the impact and issues of A-Day.

We recognise that whilst the larger pension schemes are aware of the tax simplification changes, some of the small defined contribution schemes and/or insured schemes are not fully aware of how the changes will affect their schemes.

Facts and figures

  • Back in June 2005, 11% of people surveyed thought A-Day was associated with Armageddon Day. we've come a long way since then (IFA Promotion press release...2,276 UK adults)
  • Nonetheless, a survey of 160 trustees and employers by Mercer Human Resource Consulting shows that over 4 in 10 (45%) have not yet started adapting their administration processes to comply with the Pensions Act 2004 and the Finance Act 2004 requirements that come into force next year (15 December 2005, Perspective news Alert, Mercers)
  • Defined benefit schemes feel better prepared for the new regime coming in than occupational defined contribution schemes, where 35% admit to a lack of knowledge about the pension simplification regime (JLT Benefit Solutions Ltd, Feb 06)
  • 49% of pension schemes did not know what the cost of complying with A-Day would be (Dec 05 Capita Hartshead)
  • 45% of trustees have not started adapting their administration processes to comply with A-Day (Dec 05 source?)
  • 4 out of 10 trustees and employers have not started to adapt their pension scheme admin processes for A-Day (Dec 05 Mercer)
  • 33% of pension schemes say biggest challenge is reaching agreement on the changes to be made (Dec 05 Mercer)
  • 57% of pension savers have no idea of their pension value (IFA Promotion press release)

Trustees' checklist

A five-point plan to help prepare for A-day:

  1. Understand the changes pensions tax simplification is bringing
  2. Decide how other changes impact upon existing pensions arrangements
  3. Agree what changes are going to be made
  4. Implement the changes
  5. Communicate the changes to employees and scheme members

And remember...

  • Advise scheme members of all relevant changes
  • Read the Pensions Regulator's code, Trustee knowledge and understanding
  • Review the new disclosure requirements
  • Ensure that your scheme has sufficient number of MNTs
  • Adopt new and appropriate scheme rules
  • Ensure that members consider protection against the lifetime allowance, especially those who have very high fund values
  • Contact any scheme members who are over, or near to, 75 as they may need to take action regarding their benefits

For more information on A-Day, take a look at our Briefing No. 3 - Pensions tax simplification.

Who to contact

For any pensions tax simplification query please contact HMRC as follows:

Useful links

Pension providers and professionals have useful information about A-day. Here is just a selection that you might find useful:

www.hmrc.gov.uk/pensionschemes/
http://www.hmrc.gov.uk/pensionschemes/

www.scottishlife.co.uk
http://www.scottishlife.co.uk/scotlife/Web
/Site/Employer/TrusteeZone/TrusteesandA-day/TrusteesAndA-DayPage.asp

www.standardlife.com
http://uk.standardlife.com/content/pensions
/simplification/changes.html

http://uk.standardlife.com/content/pdf/slac/
simplification_information.pdf?show=true

www.bwiser.co.uk
https://www.bwiser.co.uk/Info/SimplificationExplained.pdf

Published: The Pensions Regulator website, March 2006