In his Autumn Statement, UK chancellor Philip Hammond mentioned only in passing the government’s previously-stated plans to introduce a ban on the use of cold-calling to lure pensioners into taking advantage of the new pension freedoms, which came into force last year, confirming that such a ban would be proposed.
Other significant tweaks to the current tax and regulatory regime affecting the UK’s financial advice and cross-border financial services industry weren’t mentioned at all by Hammond in his presentation, but were included in the 72-page Autumn Statement document that was posted online within minutes of his sitting down, sometime after 1pm London time, and quickly spotted by eagle-eyed financial services industry executives, who know from experience to be on the look-out for such hidden gems.
These included a reference to a plan to ensure that the tax treatment of “foreign pensions” – including but not limited to recognised overseas pension schemes, or ROPS, held by UK residents – “will be more closely aligned with the UK’s domestic pension tax regime, by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones”.
‘Update OPS eligibility criteria’
“The government will also close specialist pension schemes for those employed abroad [“Section 615” schemes”] to new saving; extend from five to 10 years the taxing rights over recently-emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief; align the tax treatment of funds transferred between registered pension schemes, and update the eligibility criteria for foreign
schemes to qualify as overseas pensions schemes (OPS) for tax purposes,” the document says.
Pension industry sources said the revelation of plans to update the eligibility criteria for foreign was of particular interest, and that they will be awaiting the details of this latest updating when the details of the new eligibility criteria are expected to be unveiled on 5 December.
Among them was John Batty, of Isle of Man pension transfer specialists Boal & Co. “It will be interesting to see what the updates are to the OPS criteria,” he said.
“As always, the devil will be in the detail.”
As for the plan to align the taxation of foreign pensions with those of UK pensions, for UK residents, Batty added that it “wasn’t unexpected”.
Other issues that caught the financial advisory and wealth management industry’s eye in today’s Autumn Statement included Hammond’s announcement of what Keith Richards, managing director of the Chartered Insurance Institute, said was effectively a “doubling [of the] insurance premium tax between Nov 2015 and June 2017”, and a proposed reduction in the Money Purchase Annual Allowance to £4,000 per year, from £10,000.
‘Consult on cold-calling ban’
Hammond’s sole reference in his presentation to a proposed ban on cold-calling came towards the end of his address to Parliament, where he included it in the middle of a list of tweaks to existing elements of tax and fees that directly affect individual taxpayers: “We will consult on how best to ban pensions cold-calling and a wider range of pension scams”, he said.
This was rather less than the industry and those concerned about the reported rise in pension scams since the pension freedoms were introduced had been expecting from the chancellor. However, there is an additional reference to cold-calling in the document, which indicates the government intends to “shortly publish a consultation on options to tackle pension scams, including banning cold calling in relation to pensions, giving firms greater powers to block suspicious transfers, and making it harder for scammers to abuse ‘small self- administered schemes'”.
As reported here over the weekend, the Treasury Department had let it be known that the chancellor would take advantage of the Autumn Statement to announce a ban, with fines of up to £500,000 being mentioned as a proposed punishment for those who continue to call British consumers and try to talk them into transferring their UK pensions, or otherwise agreeing to be advised about them.
Campaigners for a ban on cold-calling and other measures have been adamant that the new pension freedoms are, in the words of one such campaigner – Angela Brooks, who represents Pension Life, an organisation set up a few years ago to identify and prevent pension scams – “disastrous”.
Another cold-calling-ban campaigner, UK financial adviser named Darren Cooke. took action by launching a website – www.bancoldcalling.co.uk – aimed at bringing together advocates of a ban pension cold calling, complete with a petition which visitors to the website have been urged to sign.
Today, in a statement, Brooks added that she was “cautiously optimistic” about the chancellor’s vow to consult on banning pensions cold-calling, but indicated that it was too little, too late.
“Pension Life is currently working on rescuing hundreds of victims, [who together represent] £1.7bn worth of lost pension funds,” she said. “Many of these people were scammed out of their retirement income due to such cold calling practices.”
What’s more, she added, banning cold calling could end up being “a complete waste of time, and indeed, [be] counterproductive, if it is not reinforced by a number of other essential measures, [as] the scammers’ cold-calling operations will simply change tactics”.
“What the government does next must be examined faithfully in the context of the Department for Work & Pension’s historical failures to address the question of pension and investment scams this past couple of years.”
Other key announcements contained in the Autumn Statement:
* As signalled earlier this year in the Budget, the government plans to introduce a “new penalty for any person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC”. This new regime will, the statement published today says, “reflect an extensive consultation and input from stakeholders”, with details due to be published in draft legislation “shortly”.
* In connection with this new regime (above), the defence of having relied on non-independent
advice as evidence of having taken “reasonable care” when considering penalties for any person or
business that uses such arrangements is due to be removed.
* The government will press ahead with plans to broaden the range of assets types which may be held inside a so-called Personal Portfolio Bond, a type of life insurance-based savings product. The existing restrictions date back to 1999, and the industry is understood to welcome the change, as it will mean such new types of assets as real estate investment trusts (REITs) will now be able to be held in such products
* As previously announced, the government will end the permanency of non-domiciled tax
status, with the creation of a new “deemed UK-domiciled for tax purposes” category for those who have been UK resident for 15 of the past 20 years, or if they were born in the UK with a UK domicile of origin.
* From April 2017, inheritance tax will be charged on UK residential property when it is held
indirectly by a non-domiciled individual through an offshore structure, such as a company
or a trust, thus closing a loophole that has been used by non-domiciled individuals to avoid
paying inheritance tax on their UK residential property.
* HM Revenue & Customs has confirmed that it will allow policyholders to correct ‘unfair’ tax bills resulting from ‘mistaken’ withdrawals of life policies, opting to keep the current 5% tax free allowance on offshore bonds.
Last-ever Autumn Statement
Hammond said his Autumn Statement today would be Britain’s last, as he introduced changes that he said will see the UK adopting a single annual budget,or what the published statement refers to as “a single major fiscal event each year” going forward. The first annual Budget will be delivered next Autumn, Hammond said, after which the Office for Budget Responsibility will produce a spring forecast, beginning in the spring of 2018, which will be followed by a “Spring Statement” responding to that forecast.
This, Hammond said, would promote “certainty and simplicity” within the tax system.
“The government will retain the option to make changes to fiscal policy at the Spring Statement if the economic circumstances require it,” the published Autumn Statement notes.
To view a pdf of the Autumn Statement, click here.
To read Mark Davies & Associates managing director Mark Davies’ thoughts on what, if anything, the Autumn Statement added to understanding of the pending introduction of the deemed UK domicile regime that’s due to come into being next April, click here.