HMRC unease over pension protection figures
Following the Government’s drastic decision to cut the lifetime pension allowance from £1.8m to £1.5m by April 6 this year, HM Revenue & Customs’ officials are surprised over the low amount of people who have applied to protect their pension fund.
Savers are required to apply before 6th April to retain the £1.8m allowance for their pension. Failing to apply for fixed protection will result in savings above £1.5m being taxed at 55 per cent, potentially costing investors hundreds of thousands of pounds.
The deadline for applying for fixed protection is dawning and as it falls just before the Easter bank holiday weekend advisers are being urged to send in the forms early to avoid potential delays.
Last November, Legal & General pensions strategy director Adrian Boulding warned that high-earners in group personal pensions could unintentionally lose their fixed protection as a result of differences between The Pensions Regulator and HMRC rules.
The introduction of automatic enrolment, which is due to begin from October this year, also presents possible problems for clients with fixed protection. Last August, official HMRC figures revealed that 18,000 people were at risk of losing their pension protection by inadvertently being automatically enrolled into a pension scheme as fixed protection is lost if further contributions are paid into the fund or benefits accrued.
It has been suggested by many that the Government should delay the dead- line for applying for fixed protection by 12 months due to concerns about advisers’ workloads resulting from the RDR and regulatory changes. Pushing the deadline back by 12 months would not burden the Revenue and would release pressure on the IFAs.