Welcome to the latest edition of the Forbes SIPP, SSAS and Trusts eNews.  It’s safe to say that there have been significant developments since our last issue as a result of the COVID-19 which has affected us all in some way.  This continues to have ramifications across all areas and going forward we will continue to provide as much practical information and guidance as we can in our respective fields of expertise.  We remain open throughout as usual, so if you have any legal queries or concerns feel free to get in touch with a member of the team.

From a commercial property context, an issue which is likely to become increasingly common over the coming weeks and months is where a Pension Scheme trustee’s property has been let by the Scheme to a connected party (often the trustee’s own company).  Given the economic impact of the COVID-19 outbreak, exacerbated by the nationwide lockdown, the question arises whether it would be possible for a rent payment holiday being granted to the connected tenant.  From the Pension Scheme’s perspective, as the lease has been entered into between connected parties, HMRC guidance still needs to be complied with and as it stands there are no special dispensations granted by HMRC to allow for rent holidays automatically.  Therefore, as it stands professional advice should be obtained (usually from a surveyor) as to whether a rent holiday would be acceptable given market conditions, as well as how long this should last.  Scheme administrators may also want to see evidence of the company’s financial position at the time, to further corroborate to HMRC why the course of action was taken if required to do so.

Going forward, another resource we trust you will find useful is our dedicated “Frequently Asked Questions” page on the Forbes website relating to the impact of COVID-19 covering many legal areas for both individuals and business, and which is regularly updated: www.forbessolicitors.co.uk/covid19.htm.

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.

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 charge on 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.

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 fastest 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.