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Home > Pensions > Sipps & Ssas

By Emma Ann Hughes | Published Apr 30, 2009

AJ Bell warns of Sipps tax trap for sportsmen

Following last week's Budget, Billy Mackay, marketing director of Sipp provider AJ Bell, said: "HM Revenue & Customs has confirmed the protected pension age is lost if a crystallised transfer takes place, which is not a block transfer."

For example, Mr Mackay said this meant a 45-year-old former footballer with a protected pension age and a pension fund with a life insurer who was currently drawing £15,000 in income could not transfer to a Sipp without being hit with a penalty charge.

Mr Mackay said: "If the client loses the protection before the normal minimum pension age 50, or 55 from April 2010, and is in receipt of income, the income will be treated as an unauthorised payment and hence liable to the unauthorised payment tax charge."

While there is a right to appeal, Mr Mackay said he had been told this was only likely to be successful where advice has been sought from HMRC on a particular transaction, it had been provided with full and accurate details of the transaction and the tax collectors provided erroneous advice so the client was disadvantaged as a result of consulting HMRC.

Mr Mackay said: "It seems illogical to withdraw the protection of a pension age that is in the past. Protection should continue on transfer without the need to structure a block transfer.

"To be in receipt of income one day that is then subject to an unauthorised payment tax the next because of a transfer post protected pension age makes little sense. It seems the only way to rectify the situation is to change the legislation."

Sara Gaines, spokesman of the HMRC, said where an individual with a protected low pension age transferred out of that scheme, protection would only continue in the receiving fund if it was part of a block transfer.

She said: "Although we do have statistics on overall number of unauthorised payment charges, our management information does not provide information to show the reasons for a payment being unauthorised as there are several circumstances that can give rise to such a charge.

"HMRC is not considering changing the rules for such transfers."

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