I understand the Government has issued a Green Paper on pensions. Is there anything in it that should change our mind with regards to the proposed transfer of my wife and myself from our self-administered pension scheme to a self-invested personal pension?
The situation today is that, after a great deal of reorganising, we have agreed to reallocate surplus funds from yourself to your wife, being a member of the pension scheme. We now have Inland Revenue approval to transfer you from your self-administered scheme to a Sipp.
The bulk of the transfer represents the freehold property with an extra amount of cash. Following your transfer, the intention is to seek Revenue approval to transfer your wife's overfunded money into a self-administered section 32 buyout bond so that, in 10 years, when a certificate can be signed confirming that your wife has not been a controlling director for the previous 10 years, we may then consider moving the funds into a Sipp.
As you know, there are limits to the maximum amount of money that can be transferred from an occupational small self-administered scheme to a Sipp. In this process, the amount of tax-free cash is also certified, so that you cannot have more tax-free cash under the Sipp than you would have had under the self-administered scheme.
You are right in saying that the Government has issued a Green Paper on pensions but probably of far greater importance is the supporting Inland Revenue paper. It must be stressed that these are both discussion papers before a White Paper is put before Parliament. The Revenue's intention is for its proposals to be law by April 2004.
The changes of interest to yourself are that many of the funding requirements and maximum benefits are being replaced by an overall lifetime fund at retirement of £1.4m. You would also be able to take 25 per cent of this fund as tax-free cash.
The Revenue has recently stated that it does not intend to change the rules concerning pension scheme investment into properties. One section states that income can continue to be paid after age 75, while another section implies that no lump-sum death benefits can be paid. Let us hope this is the Revenue trying to move through with a sensible proposal concerning the age 75 restriction.
You ask how any of these possible changes will affect you. If any new law directly reflected the discussion document, then I would perhaps be suggesting that you do not transfer now but await the new law and at some later stage transfer from the self-administered scheme to the new-style pension. We would not have to reallocate monies to your wife and the amount of tax-free cash would increase.
However, my advice has to be based on current legislation and, taking this into account and the trauma we have encountered over the last 12 months in getting to the position we are today, I have to recommend that you continue with the movement of your money. We have Revenue approval. Therefore, I suggest we still go ahead with the in specie transfer of the property and remaining cash to your Sipp, leaving the remaining money for your wife.
You could consider leaving your wife's money where it is in the self-administered scheme and see whether the law changes. If it does, then we might be able to create more tax-free cash for your wife and allow a non-certificated transfer to the new arrangements with pension being available earlier than under the previous section 32 transfer.
Knowing your particular circumstances, my own view is that we still proceed with both transfers under the current legislation, creating a certainty of knowing exactly where we stand and what cash and income will be available to you both. You will not be waiting on the whims of Parliament to change legislation in your favour.