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Forestall rules will hit transfers with 20% tax

High-earning pension savers will lose their contribution history and could be hit with a 20 per cent tax charge if they transfer to another pension provider over the next two years.

Under the Budget’s draft anti-forestalling measures, annual contributions are capped at £20,000, although savers who have been making quarterly or more frequent contributions above that can continue. But if a client transfers a pension to a new provider the contribution history is lost and they will be taxed 20 per cent on contributions over £20,000, even if they have regularly saved more than this amount.

Talbot & Muir director Nathan Bridgeman says: “This is incredibly detrimental to clients and advisers. The client is not trying to beat the anti-forestalling measures, they are simply trying to transfer their pension into a simpler arrangement.

“It defeats the whole spirit of simplification. We hope the Government sees sense here.”

A spokesman at HMRC says: “Adding protection would increase complexity of compliance and administration within the context of legislation only intended to be in place for less than two years and which affects only a minority – those whose income is £150,000 or more and who wish to pay contributions of more than £20,000 a year.”

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