The Association of Member-Directed Pension Schemes (AMPS) said the time is ripe to make changes in legislations to simplify in-specie contributions process linking pensions and ISAs.
Terming the present set up as “an overly complex, time consuming and expensive process,” Robert Graves, chairman of AMPS, said the procedure of making an in-specie contribution from a stocks and shares ISA to a pension scheme needs to be revised.
AMPS said it tried to negotiate a change with HM Revenue & Customs in 2006, but the HMRC rejected the plan later.
However, since the present situation is “very different”, AMPS is encouraged to initiate a change process.
“We have a different government that are tackling the long term savings issue and are keen to simplify the system. They are looking at the connectivity between ISAs and pensions and there could be an opportunity to change legislation to make the in-specie contribution process simpler,” said Mr. Graves.
One option should be allowing transfer of assets and cash as pensions contributions, said Mr. Grace, adding that the amount of the contribution being the value of the assets on the relevant date.
This would make transfer of money from ISAs to pension funds “much easier”, he said.
“However, in valuing the assets that are transferred, pension providers are still lumbered by the archaic and convoluted valuation process often referred to as ’1/4 up valuations’ but more accurately known as the statutory market valuation basis from the Taxation of Chargeable Gains Act 1992 (TCGA92),” he lamented.
He said “now is the time” to move away the TCGA92 and make the laws simple for future benefit.
“It would be much easier, quicker and cheaper to value quoted assets based on, for example, the bid price at close of markets on the previous day,” argued Mr. Graves.
“With the growth of wraps and platforms which hold assets in various guises e.g. unwrapped, bonds, ISAs and pensions, the ability to move assets in-specie between wrappers is no longer a niche facility and pension rules need to be changed to move with the times,” he added.