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New anti-money laundering rules for pension trustees

21/09/2017

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United Kingdom

Trustees of occupational pension schemes need to ensure they comply with new anti-money laundering rules. Our Pension team looks at the new requirements in detail to highlight the potential challenges

Summary

Trustees of occupational pension schemes need to ensure they comply with new anti-money laundering rules.  Most are easy to follow and apply immediately, but a new HMRC reporting duty, applying from 31 January 2018, could be more challenging.  Our Pensions team looks at the new requirements in more detail.

Background     

Money laundering continues to be a serious world-wide law enforcement problem.  The UK law concept of a trust where one person (trustee) is the legal owner on paper of assets but someone else (the beneficiary) is commercially entitled to the value of the assets is a real barrier to transparency in property ownership, which itself is key to anti-money laundering enforcement.

To deal with this problem, new money laundering rules came into force on 26 June 2017 requiring trustees to keep records of who owns the benefit of the trust assets – known as "beneficial owners".  Trustees must give details of the beneficial owners to other professionals advising the trust if they ask for them and register them with HMRC if the scheme pays certain taxes.  The most relevant taxes for pension schemes are those connected with property investments such as stamp duty land tax  If trustees are unsure whether they pay such taxes they should ask their investment advisers. 

The registration deadline is 5 October 2017 if the scheme first paid a relevant tax in the tax year 6 April 2016 to 5 April 2017.  If the scheme trustees are already registered for self-assessment because they had been paying relevant taxes before 6 April 2016 then the deadline is 31 January 2018.  HMRC recently announced that because it is the first year, if trustees miss the 5 October deadline, they will not impose a fine as long as they comply by 5 December 2017. Registration with HMRC is through the new Trust Registration Service (TRS).

What you need to do

UK occupational pension schemes are usually established under trust and for funded private sector schemes a trust structure is mandatory.  Arguably the regulations require occupational pension scheme trustees to provide HMRC with details of every member's name, National Insurance number and date of birth, but HMRC clarification is awaited.  Pending this, we consider the sensible approach is to describe the categories of beneficiary such as "Employees and former employees of the ABC Group of companies who have built up pensions in our scheme and their dependants", but for small schemes (up to 12 members) we recommend naming the members (but, of course, updating your data privacy notice to cover it).

HMRC's guidance also describes sponsoring employers as beneficiaries who should be named.  There are academic legal points that this is not an accurate analysis of trust law but in the context of the anti-money laundering regime it seems more sensible if pension scheme trustees register the names of scheme employers rather than all their members so we would advise naming employers. 

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