Taxation of Pensions Bill

Written evidence submitted by Mark Hattersley (TP 05)

1. I have been involved in Financial Services since 1979, during this time I have worked for UK trust based pension schemes in an administrative capacity, financial advisory and technical support. During my time as a UK based financial advisor I was registered with the FSA as a Pensions Specialist being a holder of the G60 qualification administered by the Chartered Insurance Institute. I am a Chartered Financial Planner, Certified Financial Planner (both here in the UK and in New Zealand); I also hold the designation of Fellow of the Institute of Financial Planning of which there are currently less than 100 in the UK. I am currently involved in the International Pensions market, specifically as a business development manager and technical officer focusing predominantly on Qualifying Recognised Overseas Pensions Scheme (QROPS) for a New Zealand domiciled Superannuation Scheme.

2. I wish to make a submission addressing just one issue that revolves around Statutory Instrument 884/2012, which imposed further requirements on schemes wishing to be regarded as an overseas pension scheme and hence a constituent in deciding if the scheme could be registered as a QROPS. This Statutory Instrument made amends to those originally laid out in SI206/2006. In particular I should like the committee to consider governing regulations on those schemes not administered by a provider operating within the European Union or established in a country with which the UK has a Double taxation Agreement (other than New Zealand), which required such schemes to utilise 70% of funds transferred to provide an ‘income for life’. ‘Income for life’ took its meaning from Finance Act 2004. Given the new found flexibilities envisaged from April 2015, I believe the ‘income for life’ requirement should now be dropped from any future taxation provisions and in particular with regards to the provisions regulating New Zealand Superannuation Schemes. As the committee may be aware, the UK and New Zealand have signed up to a particularly strong tax treaty; not only setting out the jurisdiction with taxation rights on taxable revenue and income arising but also calling upon each country to collect any unpaid taxes from its residents on behalf of the other country and to remit those funds to the originating country.

3. The provisions included in SI 884/2012 was an attempt by HMRC to accommodate the fact that New Zealand’s taxation system for Superannuation and KiwiSaver schemes (the two types of retirement focused savings vehicles in New Zealand) is T/T/E. (The Guidance Notes attaching to the Taxation of Pensions Bill reflects upon the UK system of taxation in Guidance Note 5). Following the passing of S!884/2012 members of such schemes could no longer access all funds upon retirement. The provisions under review now allow individuals access to all savings subject to tax being accounted for on the ‘income’ element of each payment.

4. As a consequence of point 3 above, I believe it appropriate for the retention of the requirement that 70% of funds transferred should be identified as providing income, in order to ensure that the member accounts for an appropriate amount of tax on the ‘income element of each payment received from a QROPS scheme in the country the member is tax resident and receives the benefits.

5. I do not believe such changes, if included within regulations, will result in abuse or outcomes not in line with current government thinking or indeed result in any noticeable loss in UK tax revenues, given that according to HMRCs December 2013 update the UK has the largest number of tax treaties in the world numbering, at that time, some 120 such agreements. Completion and submission of the requisite form attaching to Help Sheet 304 would ordinarily exempt such payments fro a UK Pension arrangement from UK taxation at source.

a. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/328990/hs304.pdf

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November 2014