Mixed use properties in pension schemes - upstairs downstairs

Although there is a general perception that HMRC forbids specific types of investments into Pension Schemes, in fact there is no comprehensive list of prohibited investments. Instead, HMRC imposes tax charges on certain types of investment as a deterrence mechanism, in particular on what is defined as "taxable property".

Investment in taxable property will create an unauthorised payment charge on the member, and a scheme sanction chargeon the scheme administrator. "Taxable property" includes residential property and moveable tangible assets "Residential property", in turn, is defined as property used or suitable to be used as a dwelling.

It is not uncommon to find a freehold property with commercial premises on the ground floor and a residential flat on the upper floor(s), particularly in town and city centres. Strictly speaking, acquisition of this type of property would fall foul of HMRC rules as being a taxable property as the freehold interest contains a residential element.

The Pensions Regulator takes tough new approach

The Pensions Regulator has come under criticism lately following the BHS and Carillion scandals, and has recently announced that they would be 'upping their game' by becoming 'clearer, quicker and tougher'. The draft Pensions Schemes Bill currently making its way through Parliament would provide the Regulator with the power to have a greater impact in the sector.

The proposed Bill introduces the potential for individuals to acquire criminal responsibility for two new offences, punishable by up to 7 years imprisonment and/or an unlimited fine.

Pension scheme trustees: duties made simple

As specialist trust dispute solicitors, we are often instructed to advise trustees on their rights, duties and obligations in order to avoid disputes and prevent potential trustee liability. In this article we will review trustee duties in straight forward, simple terms.

The trustees hold the legal title of the pension scheme assets on trust for the beneficiaries. The trustees have strict legal duties to ensure those assets provide benefits in accordance with the terms of the trust. Remember, however, statue overrides a trust document and so professional advice should be sought.  

If trustees breach their duty, then they are likely to be personally liable. Indemnity insurance is a must. Remember exoneration clauses in a trust document does not prevent the pensions regulator from imposing a fine.

Care Home Fees and Pensions

People are living longer and the need for long term care is now something which many people consider as part of their retirement planning. The 85+ age group is the fasting growing age group and is set to double between 2018 and 2041. The increased flexibility in pension provision means that people can use their pensions as a means of planning for the cost of long-term care.

In the past, the obligation to purchase an annuity contract at retirement age meant that the amount of income that a member received was fixed going forward. The more flexible pension arrangements and the use of flexible drawdown enable people to continue to build up a fund, tax efficiently, which can be used to fund care if needed or passed on to the next generation tax efficiently if not.