HM Revenue & Customs (HMRC) has published a draft Order making a number of changes to the Annual Allowance (AA) legislation, for external comment until 31st Dec 2012 . This is the first of several pieces of corrective legislation following the Government’s announcement in the March Budget that some of the changes made by the Finance Act 2011 to implement the current pensions tax regime did not deliver the policy intent. Proposed corrections to the operation of the Lifetime Allowance (and in particular Fixed Protection) are expected to be issued for consultation in December alongside draft clauses for the Finance Bill 2013.

The changes within the Annual Allowance Charge (Amendment) Order 2013 include the following, all proposed to be made with effect from 6 April 2013 with no retrospection:

• Modifications to the operation of the “carve-out” from AA calculations for deferred members’ defined benefits or cash balance arrangements, which seem to aim at the following: to be able to ignore increases granted solely as a”result of any provision contained in or made under an enactment”;and to preserve the carve-out if rule changes have been made (after October 2010 and before 6 April 2012) to introduce RPI leaver revaluation, or (in the case of defined benefit arrangements only) to match revaluation (of up to the better of CPI or RPI) of a deferred annuity “securing” a member’s benefit.
• A change on how much AA is used up when an individual has defined benefits transferred from one scheme to another as part of a “block transfer’.

It’s this last point that’s the most relevant. If it was incorporated it would mean a Qrops transfer would using up allowances for future pension contributions. Therefore a pension transfer would be most effective if you didn’t intend to return to the UK. .  It could be a red herring but there is some logic to this type of legalisation. I’ll watch with interest !