UK - The US tax authority must bring clarity to the issue of whether UK pension funds have to report benefits accrued in their schemes by US nationals, the National Association of Pension Funds (NAPF) has urged.

Currently, the US Internal Revenue Service (IRS) has outlined in proposals for the US Treasury Foreign Account Tax Compliance Act (FATCA) regulations that retirement plans will be exempted from the new rules.

But the NAPF said this exclusion is not clear enough and could create uncertainty for pension schemes.

Darren Philp, NAPF policy director, said: "We are very pleased that pension funds will be exempt from the new regulation and that the IRS listened to our concerns."

"Without such an exemption, pension funds would have been required to set up systems to identify the benefits accrued by U.S. nationals and to tell the IRS about them," he said.

This would have been very expensive for pension funds and completely unworkable, he said.

The lack of absolute clarity could confuse schemes, which might end up having to comply with the new law one day, Philp said.

"We urge the IRS to ensure the exclusion for pension funds is watertight," he said.

The organisation was responding to the IRS consultation on the planned regulations.

Under the original proposals, 'foreign financial institutions' would have been required to monitor and report to details of US citizens to the IRS in order to find potential tax evaders.

A 30% withholding tax would have been imposed on the US assets of any institution that did not comply.

Separately, the Pension Protection Fund (PPF) announced plans to take compensation administration in-house when Capita Hartshead's contract ends in 2014.

Sara Protheroe, director of customer experience at the PPF, said: "Capita has provided the PPF with invaluable support in its formative years and we would not be where we are today without them."

But the PPF was now a mature organisation protecting hundreds of thousands of people and was backed up by a multi-billion pound asset portfolio, she said.

"Therefore, we believe it is time to take the next step in our development which means looking to run member services ourselves rather than using an external supplier," she said.

By the summer of 2014, when the contract with business services firm Capita Hartshead runs out, the PPF said it is projected to have a membership of more than 300,000.

Protheroe said the plans would give the PPF more flexibility and control over the services it provides, and cut administration costs, which she said was essential as membership grew.

As the first step in implementation, the PPF will put out a request this week for expressions of interest in providing an IT system to run the new in-house services.

Capita Hartshead will continue to be an important strategic partner of the PPF, the fund said. It will provide the administration services for the Financial Assistance Scheme (FAS), which the PPF runs on behalf of the government, it said.

The PPF was set up in 2005 to pay compensation to members of pension schemes hit by insolvency.
 

Topics