A member of a scheme who flexibly accesses scheme benefits has a duty to tell the scheme administrators of any other pension scheme they have, or join in the future, that they have used flexi-access drawdown. This is because scheme administrators have a duty to inform HM Revenue & Customs if they think someone has exceeded the annual allowance.
Scheme administrators have 31 days to write to members who have flexibly accessed their benefits.
In the first draft of the Taxation of Pensions Bill, a member had 31 days in which to write to all the other scheme administrators of which he was a member to notify them he had triggered the money purchase annual allowance. But during the Parliamentary process 31 days was deemed unnecessarily harsh so it was extended to 91 days and only applies to money purchase, cash balance or hybrid schemes and not defined benefit.
If the information is not provided on time, the person that should have provided the information is liable to a penalty of up to £300. Where information is not provided after the initial penalty, a further penalty of up to £60 per day may be applied until the information is provided. If incorrect information has been provided a penalty of up to £3,000 may be due where that incorrect information has been negligently or fraudulently provided.
Aileen Lynch is head of technical at Compliance First