This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.
X
MM+cover+small+180914
Categories:Pensions,Regulation

HMRC changes drawdown stance following further legal advice

  • Print
  • Comments (16)

Following further legal advice HM Revenue & Customs now suggests income drawdown investors moving to another drawdown provider or annuitising before their 55th birthday will not incur a 55 per cent unrecognised transfer charge on their entire fund.

However, income taken through a new drawdown provider before the individual’s 55th birthday would be classified as an unauthorised payment and be hit with a 55 per cent charge.

In this week’s Money Marketing the HMRC stated that income drawdown investors switching providers or moving into an annuity before their 55th birthday would face an unauthorised payment charge of 55 per cent of the entire fund.

This followed previous HMRC guidance which suggested individuals would be hit with a 55 per cent charge on any income taken if they move providers.

But HMRC says that following the publication of the article it has taken further legal advice and it can now confirm that a transfer from one income drawdown fund to another provider before 55 would now be classified as a recognised transfer. A 55 per cent unauthorised payment charge would still be levied on any income taken through the new drawdown fund.

A HMRC spokesman says: “Following further legal advice, HMRC can confirm that a transfer of an income drawdown fund to an income drawdown fund of another provider for an individual aged between 50 and 55 would be a recognised transfer and as such the transfer would not be subject to an unauthorised payment charges.  

“However, any payments from the new fund would incur unauthorised payment charges.  This is because the individual needs to meet the prevailing normal minimum pension age (i.e. age 55) at the time of the transfer. This restriction applies until the individual’s 55th birthday.”

Chairman of the Association of Member-Directed Pension Schemes and head of technical services at Rowanmoor Pensions Robert Graves says: “We are pleased that common sense has been applied to this issue but we are now back at the original problem which is, why restrict people from taking an income in retirement?”

  • Print
  • Comments (16)

Daily Email Updates
If you enjoyed this article, sign up to receive the latest news and analysis from Money Marketing.

The Money Marketing CPD Centre
Build your annual CPD - you can log and plan your CPD hours for free with The Money Marketing CPD Centre.

Taxbriefs Advantage
Advantage is a digital reference source giving unbiased, independent, answers to your technical queries. Subscribe to Taxbriefs Advantage.

Readers' comments (16)

  • No wonder advisers have mental breakdowns. Rules change every 5 mins. If we were to treat our clients like this we would be consigned to the scrapheap.I wish the Government, FSA etc would ensure that anything that is published is factual before issuing it.

    Unsuitable or offensive? Report this comment

  • Blimey!!!

    Must phone Guiness Book of World records and see if they have a record for "most number of changes to a reason why letter in a day".

    Unsuitable or offensive? Report this comment

  • Yet another good reason for a complete overhaul of the pension system. It is time reality set in and pension provision ceased being a tax planning/avoidance tool for the wealthy.

    Unsuitable or offensive? Report this comment

  • How about using common sense and taking legal advice before coming out with a ruling. Surely if there was an element of doubt legal advice should have been taken in the first place.

    Act now think later!!!!

    Unsuitable or offensive? Report this comment

  • What a joke.

    It was clear that they had made an incorrect judgement in the first place.

    Heads should roll for this - it is a disgrace.

    Unsuitable or offensive? Report this comment

  • Andrew, can't agree with you more. First stop let's convert every public sector DB scheme to DC immediately including those for every MP and Cabinet minister. That might focus their minds a little more towards saving for retirement and pension provision.

    Unsuitable or offensive? Report this comment

  • Are these people for real??????

    Why, if a client is already in USP and taking income, can he no transfer to another USP and continue to take income. He is not trying to take advantage of any loophole in the legislation. The funds being moved are crystallised. Sure , if he is in Phased USP he will not be able to crystallise further funds until he is aged 55.

    Where is the problem???

    Lets get back to pre Pensions Simplification days!!!!!!

    Unsuitable or offensive? Report this comment

  • @John Hutton

    Unfortunately the schemes are all notional and there are no "funds" to convert! The public sector pensions work like a large ponzi scheme with current working members paying for those that have already retired.

    Unsuitable or offensive? Report this comment

  • Another rule to help Simplification on its march towards meltdown

    Unsuitable or offensive? Report this comment

  • GONB. Absolutely agree and this is no longer sustainable. If the law makers really had to understand about saving for retirement then perhaps we would have something that stood half a chance of working

    Unsuitable or offensive? Report this comment

View results 10 per page | 20 per page

Have your sayEdit my profile/screen name

You must sign in to make a comment

Fund Data

Editor's Pick



Poll

Is Labour right to be concerned about the unintended consequences of the Budget pension reforms?

Job of the week

Latest jobs

View all jobs

Most recent comments

View more comments