Ark Pension Schemes — House of Commons, 2015-03-11
Topic: Mixed Topics
David Michael Gauke (Conservative, Centre-right): I congratulate the right hon. Member for Blackburn (Mr Straw) on securing the debate and on setting out his case so clearly and with such forensic skill, which has been a characteristic of his role as a Member of Parliament for some 36 years. As the right hon. Gentleman outlined, the Ark pension schemes are a number of schemes that were administered by Ark Business Consulting. The schemes operated a pensions reciprocation plan that involved loans being paid between schemes and their respective members. That was on the basis that members could access a proportion of their pension savings without breaching tax rules intended to ensure that members access their tax-relieved pension savings only from age 55, under a practice known as pension liberation The right hon. Gentleman raised a number of concerns about the tax implications for individuals involved in the schemes. It might help if I set out the tax rules in a little more detail before turning to the particular points he raised. Tax relief is provided on pensions savings with the expectation that the funds are used by the member to provide benefits later in life. The tax rules therefore set out the various payments that a pension scheme is authorised to make to, or on behalf of, a member. They include payments of authorised benefits—pensions and lump sums—as well as such payments as transfers to another registered pension scheme. To be an authorised payment, these benefits cannot be paid before the minimum pension age, currently 55 Where payments are made that are not authorised, they are classed as "unauthorised payments" and are subject to certain tax charges. These charges are intended to recover the tax relief previously given on the savings, as they have not been used as intended by the tax rules. Where savings are taken before age 55, this is an "unauthorised payment" and tax charges will apply. A loan made to a member from a registered pension in connection with their pension savings is also an "unauthorised payment". This guarantees fairness to the taxpayer and ensures that pensions are not simply used as a tax-efficient savings tool. HMRC is looking into whether the payments made to the members of the Ark schemes are authorised by the tax rules The tax position in relation to the Ark pension schemes is by no means straightforward. The right hon. Gentleman asked whether, if the loans are repaid, they can be treated for tax purposes as though they had never happened. That is not the case, as loans are "payments" for the purposes of the tax legislation under consideration, whether or not they are repaid. He asked why we cannot return to the status quo ante. To do otherwise than treat loans as "payments" would enable people to withdraw funds early from their pension pots without any tax implications, and then return them to their pension pots at some point in the future if they so wished, with no consequences. Clearly, we do not want to encourage that type of speculative behaviour. The rules essentially comply with the principles that have been in place since tax relief was introduced many years ago.