Trust Service Update & Divorce and Your Pension
Trust Registration Service update
The Trust Registration Service (TRS) opened in 2017 with the aim of digitalising the trust registration process. Following the UK’s adoption of the EU’s Fifth Anti-Money Laundering Directive (5MLD) in 2020, changes to the TRS were required in order for HM Revenue and Customs (HMRC) to fulfil its obligations under the new regulations.
The new rules require all UK express trusts and some non-UK trusts (including most non-taxable trusts) to register with HMRC. The TRS began accepting registrations from non-taxable trusts in September 2021, with an initial deadline of 10 March 2022. Due to delays in getting the TRS prepared, this deadline was later amended to 1 September 2022.
Rules relating to non-taxable trusts
The September 2022 deadline applies to all trusts that existed on or after 6 October 2020 – even if they are now closed. Following this deadline, all new trusts (and any changes to the details of existing trusts) must be registered within 90 days. In order to not penalise trusts set up close to the September 2022 deadline, however, the 90-day rule will also apply to trusts set up on or after 2 June 2022.
Which non-taxable trusts are exempt?
There are some trusts that are exempt from registration unless they pay UK tax. Some examples include trusts used to hold money or assets of a UK-registered pension scheme, trusts holding life insurance and other policies that pay out upon a person’s death, charitable trusts and will trusts.
We understand that the rules relating to trusts are complex, so please don’t hesitate to contact us if you are unsure.
Divorce and your pension – a supporting role
Research1 suggests that nearly one in five people are, or will be, financially worse off due to their divorce, and that many divorcees struggle to make ends meet after separating from their partner.
The statistics make for worrying reading. A third of divorced respondents said they were forced to take money from their savings to supplement their finances, 20% had to use credit cards for everyday expenses, 18% borrowed from family and friends, while 15% resorted to selling their possessions to make ends meet.
Pensions are an asset
Pensions can be highly valuable assets – 42% (or £6.4tn) of UK wealth is currently held in private pensions – meaning that a pension can be a hugely important part of a divorce settlement. And yet, 15% of divorced people had no idea that their pension could be impacted by getting divorced, while 35% did not make any claim on their former spouse’s pension.
Don’t underestimate your pension
Alistair McQueen, Head of Savings & Retirement at Aviva, commented, “It’s critical that, as part of the separation process, couples take time to think about and discuss one of their single most valuable assets, their pension […] It can often be a very complex issue so, as well as hiring a family lawyer, it would be advisable for couples to contact a financial adviser to walk them through the pension valuation and financial process.”
The impact of ‘no-fault’ divorce
It has yet to be understood how the introduction of so-called ‘no-fault’ divorce in April this year might be starting to impact the way in which pensions and other assets are treated in divorce settlements. We would always recommend speaking with a qualified financial adviser for guidance relating to the financial aspects of your divorce.
We are here to help you make some important decisions with your finances as you navigate the complexities (emotional and financial) of divorce.
1. Aviva, 2022
The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.
It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.