Transfers in drawdown

General Principles

Each transfer of benefit received after 5^th April 2006 from a contract that was already in drawdown has to be isolated in a separate arrangement within the SSAS or SIPP. More details on arrangements.

There can be pension payments, transfers out and an annuity but no other transactions (no contributions and no lump sum). There can be no transfers to or from other arrangements in the same scheme.

Drawdown funds derived from BCEs that took place in the scheme administered with Omni are called ‘Normal’ by Omni, to distinguish from transfers in drawdown and also from pre 2006 funds. The funds may have been transferred into this scheme before vesting. In this document native is used to refer to funds not transferred in drawdown, which can include pre 2006 funds.

Such transfers in drawdown are abbreviated to ‘TiD’.

Accepting Transfers

When a transfer in drawdown is received, the bank transaction is processed in the normal way, as a ‘Transfer In’. The transaction is imported to the ‘Members, Transfer In’ screen in the normal way and then the extra details can be entered. The extra fields just show that the transfer was in drawdown, whether the funds were vested before April 2006 and the total amount vested in the BCEs that gave rise to the transfer fund (see below).

When the screen is closed, Omni allocates a reference to the transfer. The first transfer is called ‘TiD1’, the second would be ‘TiD2’ etc. A maximum of 5 such transfers are allowed.

If a mixture of funds is received, with some vested before April 2006 and some from BCEs after 5^th April 2006, the HMRC rules require these funds to be allocated to separate arrangements.

A transfer in drawdown can have a mixture of protected rights and normal rights. It is assumed that the proportion of protected rights will always remain constant.

Original Amount Vested

There is a field for the original amount vested. This is used for the BCE5A at age 75 or when the annuity is bought. If there was more than one BCE in the paying scheme then the total amount vested for drawdown over all BCEs is entered.

Pension Paid This Year

The receiving scheme inherits the ‘pension year’ from the transferring scheme. In order to implement the drawdown limits, the amount of pension already paid in the current pension year by the transferring scheme needs to be stored. The XL report for Pension Limits will then take into account both the pension paid from the current scheme and the previous scheme in the current year.

Pension Payments

The ‘Members, Pensions’ screen stores details of the pension payments that will be made and have been made:

1. In general, a member could have a native pre 2006 pension, a native post 2006 pension and one or more TiD pensions (pre 2006, post 2006 or some of each).

2. The administrator needs to identify the part of the pension payments from each part of the fund, including each TiD fund.

3. The ‘Pre 2006 Part’ column in the Pension Payments grid refers only to a native pre 2006 pension. A TiD can relate to funds vested pre 2006 but this is not included in the pre 2006 fund (because the ‘native pre 2006 fund’ has to be in its own arrangement). A native pre 2006 fund and a TiD pre 2006 fund cannot be amalgamated.

4. In general, a member will want one pension payment each month or year (not one from each arrangement). This can be achieved by setting a percentage of overall pension payments for each arrangement.

5. There is a tab on the ‘Members, Pensions’ screen, called ‘Extra Arrangements’, that only appears when the member has a ‘pre 2006 fund’ or a TiD fund. This allows the pension percentages for each TiD fund to be entered in one place. The native pre 2006 pension is also shown. The balance of the pension is recalculated and shown so that user has the whole picture. It is up to the user to check that the percentages add up properly.

6. Alternatively, if the member wants to draw a pension payment from only one arrangement, a separate bank transaction can be entered. That pension payment can be allocated to a member and then to one of the member’s arrangements on the ‘Bank, Bank Entry, Add Details’ screen. For that payment only, this overrides the percentages stored on the ‘Extra Arrangements’ tab.

Pension Limits

On the Pension Limits tab, the ‘Fund Name’ appears if there is a TiD fund or a pre 2006 vested fund, and the dropdown list only includes the TiDs or pre 2006 funds that exist for that member.

Pension Importing

When importing, Omni calculates the amount of each pension payment relating to each fund (arrangement). All parts are rounded to nearest penny. If the parts add up to more than the total payment then the pre 2006 pension is restricted to ensure the parts add up. If the pre 2006 part is zero, the last TiD pension is restricted if necessary so that the parts add up.

Screen Display

The ‘Members, Pensions’ screen only shows the data that applies for a member. The columns that are visible are refreshed when the member selection is changed.

On the Benefit Payments tab there is a column for each TiD fund that exists. If there are no TiDs for a member then no TiD columns are shown.

On the Pension Limits tab, the ‘Fund Name’ does not appear if there are no TiDs and no pre 2006 vested fund.

The F6 button to calculate the pre 2006 part of the pension will only work with pensions (it ignores lump sums because there should be no lump sums from pre 2006 vested funds). This should only be needed infrequently, because Omni calculates the pre 2006 part automatically when importing.

Buying an annuity from TiD fund.

If there are several arrangements, strictly each arrangement buys its own annuity. Each arrangement needs to be treated separately for BCE5A. The annuity cost for each arrangement will be a separate bank transaction and imported separately so that Omni can calculate the lifetime allowance tax charge. In practice, the various funds may be amalgamated into one annuity (similar to buying one annuity from several separate PPPs).

Transfers out from TiD fund.

Transfers out are similar to annuities. They need to be processed as separate transactions so that the receiving scheme preserves the original data for the arrangements relating to transfers in drawdown.

The transfer-out screen allows the amounts relating to all of the subfunds to be recorded.