Advisers warned to recheck six months of HMRC pension data

Advisers warned to recheck six months of HMRC pension data

Financial advisers who have been using the HM Revenue & Customs (HMRC) annual pension allowance calculator since at least September should recheck the figures, as some of the results might be incorrect.

FTAdviser reported last month (18 April) that HMRC took down a webpage that gave savers wrong pension calculations, after complaints from Royal London.

However, according to emails seen by FTAdviser, the taxman admitted issues with this calculator in September 2017 and more recently in March, with several financial advisers contacting HMRC about misleading figures.

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Charles Chami, director at Bristol-based Glamis IFA, sent an email to the taxman in January flagging up a discrepancy of £27,000 in the annual allowance calculations for one of his clients.

He told HMRC all three pension companies and his own calculation gave an available annual allowance for this year of £55,740 but the tax office's calculator gave £28,666.

Mr Chami argued if he had used the HMRC figure, "it would have meant the client lost out on the carry forward allowance to which he was entitled and several thousand pounds of tax relief on his pension contributions".

He also flagged up an error on the benefits date mentioned in the calculator.

A spokesperson said HMRC provided guidance on this issue in its March newsletter.

HMRC stated: "This section tells users to enter all pension savings for 6 April 2016 to 5 April 2017. This should read 'Include all savings for 6 April 2017 to 5 April 2018'.

"We're working to correct this as soon as possible and we will tell you in a future newsletter when this has been corrected. We're sorry for any confusion caused by this error."

The spokesperson for HMRC added: "The calculator was providing the correct outcome where the correct information was input."

Sir Steve Webb, director of policy at Royal London, and former pensions minister, said the government has made the limits on pension tax relief more and more complex and it therefore has a responsibility to provide tools to help people make sure they know what the right limits are. 

Sir Steve said: "HMRC should check these tools properly before they go live and should take them down as soon as errors are reported.

"It is totally unacceptable to leave a site up with no warning, allowing people to get the wrong answer.

"Unfortunately, advisers may need to check any calculations they have produced based on the HMRC calculator to make sure that they have generated the correct information as the basis for advice."

Gem Durham, independent financial adviser at Obsidian, agreed with Sir Steve.

She said: "Indeed, advisers or anyone else who has used these calculators since September would do well to check the figures."

In September 2017, the taxman acknowledged another error in the calculator, with the carrying forward unused allowance from 2012 to 2013, but it wasn't until the November 2017 newsletter that they said the problem had been fixed. 

According to Royal London, in the interim period the website continued to provide incorrect data for some taxpayers.