Update for pension schemes

HMRC recently published Pension Schemes Newsletter 37. Extracts follow below.

Re-structuring borrowing

Some pension schemes with money purchase arrangements that already had or were close to the maximum permitted pre A-day levels of borrowing at A-day (6 April 2006) have been finding the 50% borrowing limit in FA 2004 s 182 a barrier to commercial refinancing arrangements.

HMRC have confirmed that they are content to operate this rule as an arithmetical test so a replacement or renegotiation of existing borrowing including pre A-Day borrowing will not give rise to a scheme chargeable payment unless there is an increase in the total amount borrowed.

In practice HMRC say this should mean that taking out a new loan to repay existing borrowing should not trigger a scheme sanction charge. Similarly an extension of the repayment period or a change in the rate...