Savers will no longer have to seek out all of their past pension providers within a month of using new freedoms to access their fund to avoid fines, after the government relented and tabled a series of amendments yesterday (24 November).
Under the amendments tabled by chancellor George Osborne, savers will only need to tell those firms to which they are still activity contributing, or will begin to contribute to in the future, that they have taken advantage of the new rules.
They will also have 91 days to complete the reporting before facing fines, three times longer than the original draft rules.
The amendments follow a series of challenges raised during House of Commons committee hearings, which criticised proposals designed to close a potential tax loophole but which seemed to place a heavy burden on savers.
Under the rules, pension schemes must write to clients who access their fund under the reforms within 31 days, notifying them when they did so and what effect it will have on their annual allowance.
Savers were then required to pass this on to all other providers and schemes within 31 days. This was designed to prevent them continuing to contribute to schemes under the old £40,000 annual allowance, instead of the pension freedoms allowance of £10,000.
If a saver does not provide relevant disclosure and necessary documentation within the enhanced deadline, they remain 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.
ashley.wassall@ft.com
