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Warnings and apologies: the week in news

Warnings and apologies: the week in news

Warnings and apologies have been rife this week, as providers and government offices held their hands up to mistakes.

With another busy working week drawing to a close, it is time for the week in news.

1) Sorry seems to be the hardest word

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HM Revenue & Customs was forced to admit this week that its self-assessment tax calculator had provided incorrect information

The tax office fixed the calculator after it was told it had incorrectly stated tax bills for withdrawals from life policies.

Top slicing relief applies to life policies and means if a client had a life policy which was held for 10 years, and paid out £40,000, then the cash amount is divided by the number of years held, to create a one-year value.

But since changes were made to the personal tax allowance in 2010, the tax office has been incorrectly calculating the tax liability, by excluding some higher rate taxpayers from the tax-free allowance to which they are entitled. 

Instead of top slicing relief being properly applied, individuals were being taxed on their income from the policy for the year in which it was taken - so in some cases, basic rate taxpayers have been taxed as higher rate taxpayers.

2) Also sorry

Prudential has admitted it provided poor service on its retirement accounts after receiving multiple complaints from an adviser.

Alan Kendrick, a consultant at Oakwood Financial Services, complained about the provider's failure to pay funds into his clients' accounts on agreed dates.

He said the problems began last year after Prudential had failed to transfer funds into a client's retirement account on time and they were made worse by the provider's failure to communicate properly when attempting to rectify the problem.

A Prudential spokesperson told FTAdviser the provider had faced difficulties in the early stages of the launch but has worked hard to fix the problems.

3) Costly Fos

Sir Steve Webb has warned that financial advisers are facing higher premiums on their professional indemnity (PI) policies as insurers are already factoring in the new Financial Ombudsman Service (Fos) compensation limit.

Under the plans published last October claimants will be able to claim up to £350,000 through the Fos from April 1, 2019 if the incident complained about took place on or after this date.

If it took place before April 1, 2019 the compensation limit will be £160,000 and both limits will be increased with consumer prices inflation every year to make sure consumers and small businesses receive adequate compensation.

Sir Steve, the former pensions minister, now director of policy at Royal London, said one IFA he spoke to had been told they could only obtain PI renewal if their annual premium was increased nearly fourfold from £13,000 to £50,000, and they agreed to an excess on each individual defined benefit (DB) transfer case of £35,000.

4) Act now or be sorry later

Advisers have been urged to put their clients' life policies in trust or risk facing claims from unhappy clients.