Treasury Update

John Glen Excerpts

Monday 21st February 2022 Written Statements

[The Economic Secretary to the Treasury (John Glen)]

Collective money purchase pension schemes, which are also known as collective defined contribution pension schemes, are a new style of pension scheme. Contributions into the scheme are pooled and invested with a view to delivering an aspired level or benefit at a fixed cost, and without guarantees. The framework for these schemes was set out in the Pension Schemes Act 2021 and the tax regime was set out in the Finance Act 2021.

The Government’s policy intention has always been that payments made from a collective money purchase pension scheme in wind-up should be treated as authorised payments. Following the publication of the draft Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022, the Government are aware of two instances where there is some uncertainty about how benefits from such a scheme would be treated in tax terms, should it ultimately become necessary to wind it up.

The first is about whether a member of such a scheme which is winding up can designate their funds into drawdown before transferring to another scheme. The Government can confirm that the policy intent here remains that this would be an authorised payment.

The second is whether such a scheme, in winding up, could pay a member a periodic income as an authorised payment. Here, too, the Government confirm that the policy intent continues to be that this would be available as an authorised payment.

This statement reconfirms that the original policy has not changed following the publication of the regulations and sets out the Government’s commitment to ensuring that this policy intent is delivered, including by pursuing further legislative change where necessary. Tax guidance and any necessary draft clauses for tax legislation will be published in due course as part of the usual tax policy-making process.

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