Personal PensionOct 23 2014

Savers face penalties over pension freedoms reporting

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Updated rules published earlier this week under the draft Taxation of Pensions Bill have revealed savers face fines of potentially thousands of pounds if they fail to meet a new deadline to inform providers they have taken advantage of the freedoms coming into force from April.

If a saver does not provide relevant disclosure and necessary documentation within 31 days, the saver will be liable to an initial penalty of up to £300. A further penalty of up to £60 per day may be applied until the information is provided.

If incorrect information has been provided a penalty of up to £3,000 may be due where it is deemed to have been “negligently or fraudulently” submitted, in line with the standard penalties for failure to provide information under section 98 of the Taxes Management Act 1970.

This follows the announcement earlier this month that pension members utilising new pension freedoms 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.

Those using flexi-access drawdown or taking uncrystallised lump sums will be subject to an annual allowance of £10,000, lower than the £40,000 currently for most savers and those in capped drawdown.

Under the rules 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. Savers must then pass this on to all other providers and schemes.

ruth.gillbe@ft.com