The following guide outlines important information that is relevant to Skandia pension arrangements for individuals who are affected by the reduction in the annual allowance to £50,000 per annum.
The Finance Act 2011 contains amendments to the Pension Input Period rules. Some of the amendments affect the length of the first Pension Input Period for new Pension Input Periods commencing on or after 6 April 2011. It is important for clients who will be funding up to or in excess of the annual allowance to understand how their Pension Input Period will operate under their Skandia pension arrangement.
The first Pension Input Period (PIP) for a Skandia pension arrangement
The first PIP for the arrangement will commence on the date the first relievable contribution is received and lasts for a year and a day. For example, if the first relievable contribution was received on 20 October 2010 the first PIP will run until 20 October 2011. If a member wishes, they can nominate an earlier end date for the first PIP (before 20 October 2011) but nominating a date in the past is no longer permitted. The nominated date must not be a date before the date the notice is made to the scheme administrator.
The first Pension Input Period (PIP) Skandia arrangements
The first PIP for the arrangement will commence on the date the first relievable contribution is received and lasts for a year (ie one day less than for first PIPs commencing before 6 April 2011). For example, if the first relievable contribution is received on 20 August 2011 the first PIP will run until 19 August 2012. However, the member could nominate a date between 20 August 2011 and 19 August 2012 for the PIP to end, but the nomination must be made by a specific date determined in accordance with the following Q&A.
If the member wants to nominate a different end date for the first PIP when does the nomination have to be made?
Their nomination must have been made before we accept the application. In practice this is before the first PIP starts and means that we will need to receive a written nomination that is dated no later than the date the application was submitted. Where the application is for a top up to an existing account/plan then the account/plan number should be referred to in the nomination.
Where the application is for a new SIS Collective Retirement Account (CRA) then the application reference should be referred to in the nomination since at that point they won't have a CRA account number. For example, on 30 August 2011 a lump sum contribution application is submitted. If the member wants the first PIP to last for less than a year they will have to send a written notification dated no later than 30 August 2011 that confirms they wish the first PIP in respect of the CRA application to end, for example, on 15 September 2011.
Where the application is in respect of a Skandia Life pension then the nomination should be attached to the paper application.
A specimen nomination letter to change the first PIP can be found at the bottom of this article. The letter can be used for Skandia Life plans and the CRA.
Once the first PIP has ended the next PIP will commence immediately afterwards. It will last until the anniversary of the end date of the first PIP. A second PIP starting on 6 July 2011 will therefore end on 5 July 2012. It is possible for the member to nominate a different end date provided the end date falls within the tax year following that in which the first period ended. This ensures that only one PIP will arise within a tax year. Following on from the above example, the member could not nominate an end date which fell before 6 April 2012. A specimen nomination letter to change second and subsequent PIPs can be found at the bottom of this article. The letter can be used for Skandia Life pension plans and the CRA.
If a client is making a contribution to a CRA or Skandia Personal Pension Plan for the first time, unless the pension input period is shortened to end in the current tax year the contribution will form part of the client's Annual Allowance for the 2012/13 tax year and not the current tax year.
Where a carry forward exercise has been completed as part of the contribution being paid, the initial PIP will need to be shortened to end in the current tax year if the unused relief for the PIP ending in the 2008/9 tax year is to be included.
If amending the first PIP, the signed nomination letter must accompany any application papers setting up the arrangement.
We will be looking to include wording in the application process as soon as we are able but in the meantime the nomination letter will deliver client requirements where this is required.
This article is based on Skandia’s interpretation of the law and HM Revenue & Customs practice as at July 2011. We believe this interpretation is correct, but cannot guarantee it. Tax relief and the tax treatment of investment funds may change.
THIS WEBSITE IS FOR FINANCIAL ADVISERS ONLY
The content of this site is approved for use by financial advisers only. It hasn't been approved for customers to view.
If you are NOT a financial adviser, please click here to return to Skandia's homepage.