Pension members utilising new pension freedoms from April will be left responsible for notifying all other providers they have savings with in order that they do not have access to a higher annual allowance than permitted under the new rules, the draft Taxation of Pensions Bill has revealed.
Buried deep within the Taxation of Pensions Bill’s are several points that may lead to new headaches for pension schemes and their members looking to take advantage of next April’s at-retirement reforms.
Pension schemes must write to clients who access the Budget freedoms within 31 days, notifying them when they did so and what effect it will have on their annual allowance.
Once the scheme administrator contacts the member, it then falls onto the member to contact all other pension scheme providers to tell them that they have accessed the freedoms under another scheme.
The move to utilise the pension freedoms through flexi-access drawdown, uncrystallised lump sum or a flexible annuity will decrease the annual allowance to £10,000 from £40,000.
According to the Bill, the new information requirements are intended to ensure that the member is aware that they have flexibly accessed their pension rights and the consequences of having done so.
Meanwhile, it should mean that the scheme administrator for every scheme that they are a member of will also be aware, so they can provide information about the member’s savings in that scheme based on the lower £10,000 money purchase annual allowance.
A new regulation also specifies the various things individuals and scheme administrators must do under the new regulations, including reference to those members going for flexi-access on or before 5 April 2015.
peter.walker@ft.com
