AJ Bell is calling on HM Revenue and Customs to relax rules preventing savers who failed to claim primary protection on their tax-free pension cash on A-Day from taking fixed protection before April 2012.
Earlier this month, Money Marketing reported that 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 AJ Bell reveals that 3,913 people took out primary protection without lump-sum protection on A-Day.
AJ Bell technical marketing manager Gareth James says: “HMRC could easily solve this problem by allowing individ-uals the option to switch from primary to fixed protection.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “It would be fairly straightforward and entirely reasonable to tweak the rules so people with primary protection can roll over into fixed protection.”