Budget 2015: The government is introducing an income tax exemption for payments made for advice on transfers out of defined benefit (DB) schemes to defined contribution (DC) pension schemes.
The new measure, announced as part of Chancellor George Osborne’s 2015 Budget, will apply to any employer that provides or pays for appropriate independent advice for an employee in order to meet their obligation.
The government said that this would ordinarily attract a tax charge.
In addition, No xlass 1A national insurance contributions (NICs) liability will arise because its treatment automatically follows the tax position.
A small administrative saving will accrue in respect of any employees where employers would have voluntarily paid for advice, which they will be obligated to pay for under the Pension Schemes Act 2015.
The Pension Schemes Act 2015 means that before committing to a DB to DC transfer, members will be required to obtain appropriate independent advice from a Financial Conduct Authority-approved advisor before the scheme can action the transfer.
Nick Griggs, head of corporate consulting at Barnett Waddingham, said: “This is timed to tie in with the introduction of the new flexibilities on 6 April 2015.
“The provision of advice is usually taxed as a benefit to the employee. This will be a welcome easement for employers which are considering such exercises as a way of allowing DB members to access the new flexibilities, while also managing their pension liabilities, and for employees who wish to take their pension flexibly.”
