Pension providers and HMRC in standoff over 'A-Day' changes

HM Revenue & Customs’ changes to pension scheme asset valuations
policy have been panned by industry experts after the six-month bedding-in phase
came to an end last week.

The new regime, dubbed ‘A-Day’, was introduced on 6 April, but the
amendments, which will impact on the calculation of tax-free lump sums when
people retire, have caused a frosty stand-off between pension providers and
HMRC.

Up to 150,000 self-invested personal pensions plans with assets totalling
about £30bn may be affected by the shift, which allows a wider range of
investments to be included and also increases contribution levels.

‘I am flabbergasted that ministers are refusing to budge on this issue,’ said
Andy Bell MD of self-invested personal pensions company AJ Bell to the
Financial Times. ‘It is lunacy.’

HMRC has insisted on shares held in pension schemes being valued by a system
known as the ‘quarter-up’ method. The process is normally used for valuing
assets in a person’s will by taking the bid price and tacking on a quarter of
the difference between that and the offer price.

But misgivings have surfaced because the computer systems of most
stockbrokers providing share prices to pension providers will have to be
modified before they are able to calculate quarter-up figures. Prices will have
to be worked out manually until systems can be converted, which could cause
delays and raise costs.

HMRC responded: ‘We will keep all areas under review especially where these
create administrative difficulties.’