The measure

When a defined benefit occupational pension scheme is no longer able to make payments to its pensioners it can in certain circumstances qualify for assistance from the Financial Assistance Scheme (FAS) to help meet its obligations. The FAS is being extended to top-up payments to pensioners, to a maximum of 90% of the entitlement, in qualifying pension schemes that failed between 1 January 1997 and 5 April 2005. After that date a different fund has been carrying out the same function. Lump sum payments from pension funds can qualify for tax relief and the new measure aligns such payments with the taxation of pension payments.

Who will be affected?

Individuals who receive payments from the FAS in respect of defined benefit occupational pension schemes, commonly known as final salary schemes, which were wound up between 1 January 1997 and 5 April 2005.

When?

The legislation will cover all payments made by the FAS, whenever they are made.

Our view

The measure should ensure that pensioners in wound up schemes are entitled to the same reliefs as those in continuing schemes. As such, they should not have a tax disadvantage, as well as suffering a minimum of 10% loss of pension entitlement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.