HMRC amends A-Day dependant definition

HMRC’s latest amendment to A-Day regulations concerning dependants’ pensions doesn’t exactly have a title that immediately explains itself. Although this won’t affect that many people, it’s important to those that it does. So, quoting straight from the explanatory memo to see whether it’s relevant to you or your scheme, here’s the policy background:

What is being done and why:

7.1 Under the tax rules applying to registered pension schemes which came into effect from A Day, a pension paid to a child of a deceased member of a registered pension scheme must cease when that child reaches age 23, unless the child qualifies for a dependant’s pension on grounds of incapacity.

7.2 Under the pre A day rules there were some specific circumstances where children’s pensions could continue to be paid after age 23. The main circumstance was where the pension scheme’s rules permitted this pension to be paid until the child ceased full-time education or vocational training. Article 34 of the principal Order allows such pensions to continue to be paid after A Day without attracting unauthorised payment tax charges.

7.3 After A Day Her Majesty’s Revenue and Customs received representations concerning pensions payable to children who were too old to fall within either the age 23 rule or the existing transitional protection. Typically these individuals were carers who looked after an elderly parent. The amendments made by this Order will give protection to such pensions arising before 1 July 2008.

There. Now you know. A subtle change, but important for those that it affects. See:

The Taxation of Pension Schemes (Transitional Provisions) (Amendment No. 2) Order 2009 (SI 2009/1989)

(6 pages) and Explanatory memorandum

(3 pages)