A J Bell is calling on HMRC to relax rules which prevent savers who failed to claim primary protection on their tax-free pension cash on A-Day taking fixed protection before April next year.
Earlier this month, Money Marketing revealed investors who failed to claim primary protection on their 25 per cent tax-free cash on April 6, 2006 could see their maximum available tax-free pension cash plummet from £450,000 to £375,000.
The drop comes as a result of the Treasury’s decision to cut the lifetime allowance for tax-privileged pension saving from £1.8m to £1.5m from April 6, 2012.
Fixed protection protects people from this drop, but HMRC rules prevent people who have already claimed primary protection from switching to fixed protection.
A Freedom of Information request from A J Bell reveals that 3,913 people took out primary protection without lump sum protection on A-Day.
A J Bell technical marketing manager Gareth James says: “We are not expecting HMRC to increase the tax free lump sum payable to those with primary protection but it can easily solve this problem by allowing individuals the option to switch from primary to fixed protection.”