Enhanced protection forms published by Her Majesty's Revenue and Customs (HMRC) are causing confusion among scheme members and advisers.
The problem seems to be arising over Form APSS 200 and the terms in the explanation notes of “relevant benefit accrual” and the definition of what constitutes an “active” member.
Specifically question 3.1 on the form asks if you have been an “active” member, and if the answer is yes, this means you can’t have enhanced protection. But when you read the explanation notes an “active” member is one who achieves “relevant benefit accrual”.
According to Rachel Vahey, head of pensions development at Scottish Equitable, where the confusion lies, is that under the enhanced protection rules, if you are a member of a defined benefit scheme then you can continue being what is called an “active” member of a scheme and carry on accruing benefits.
But as an "active" member with protection you can only have limited accrual, and if the accrual goes over a certain level, called the appropriate limit, then the enhanced protection is lost.
She says Scottish Equitable has received a number of queries over the issue as many people opting for enhanced protection may be planning on receiving a limited amount of accrual up to the appropriate limit.
But she adds: “Using the term 'active' member in the protection forms seems to be throwing many of them, and that's where the confusion is arising. This just shows while all the A-Day legislation has now been released, the challenge is now getting to grips with how the procedures work and the reality of filling in forms.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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