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Bell urges HMRC to relax fixed protection rules

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.”

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