HMRC will not budge on drawdown trap
HM Revenue & Customs has confirmed that income drawdown investors aged between 50 and 55 are unable to buy an annuity or switch to another drawdown provider without facing a 55 per cent unauthorised payment charge.
Money Marketing revealed recently that the pensions industry was seeking clarification from HMRC on the matter.
In a note to Sipp trade body, the Association of Member Directed Pension Schemes, yesterday, HMRC said that any pension benefits paid by the new scheme following a recognised transfer of sums and assets, under pension rule 1 in s165 FA 2004, need to meet the prevailing normal minimum pension age of 55.
Amps chairman Robert Graves says: “Amps considers this to be extremely disappointing, given that it flies in the face of common sense, fairness to the consumer and one might argue, policy objectives. Amps will keep this issue on its issues agenda and raise at future opportunities.”
AJ Bell marketing director Billy Mackay says: “This ruling lacks any common sense. Any client who transfers and receives income now faces unauthorised payment charges which effectively traps them in the dated existing plan until age 55.”