HMRC has released a guidance note on recycling of pension commencement lump sums which has been met with bewilderment.
Hargreaves Lansdown head of pensions research Tom McPhail has labelled the guidance on what is known as turbo-charging as “anything but simple”.
McPhail says a first reading appears to offer confusing guidance on when an increase in annual contributions in respect of a registered pension scheme is and is not a “significant increase” in contributions.
Gordon Brown announced in the pre-budget report last year that there will be measures to prevent the abuse of the rules for tax-free lump sums from April 6 2006. But no guidance has been provided until now as to how the issue would be policed.
McPhail says: ‘We are still dissecting the guidance but our initial response is that these rules are totally disproportionate to the scale of the issue.”