Forestall rule change lets savers protect contributions if they transfer
The Government has released new regulations which allow savers to protect existing regular contributions if they transfer to another pension scheme under the anti-forestalling rules.
Under the Budget’s draft anti-forestalling measures, annual contributions are capped at £20,000 although savers who have been making quarterly or more frequent contributions above that can continue.
Prior to this change, pension savers who benefited from protection lost the protection if they switched providers as their contribution history was wiped.
This meant that they would be taxed 20 per cent on contributions over £20,000, even if they regularly saved more than this amount.
Money Marketing raised the issue last June. The new regulations are set out in The Special Annual Allowance Charge (Protected Pension Input Amounts) Order 2010.
AJ Bell marketing director Billy Mackay says: “Pension savers have been prevented from transferring between pension schemes for fear that they would lose protection of their regular contributions.
“We have been calling for this issue to be resolved since the Budget in April 2009 and welcome the new rules. It is good news that the Government has listened to the pension industry on this issue.”