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HMRC to amend annuity adviser charging rules

HM Revenue & Customs has confirmed it will not force people to take an adviser charge from pensions tax-free cash following adviser concerns over possible complications for people who shop around post-RDR.

Under the current rules, if a customer wanted the adviser’s fee to be paid from their pension pot after the RDR it would need to come from the entire fund.

In recent months IFAs have raised concerns that this will cause problems because if an individual decides to switch provider when they buy an annuity, the tax-free cash is paid by their original provider.

This means that the client’s new provider would need to contact the previous provider and request they pay a portion of the adviser charge from the tax-free cash to the adviser.

However, HMRC officials have yielded on this rule following adviser and provider representations in recent weeks and will now allow the adviser charge to be taken from the remaining fund only, after the tax-free cash has been taken.

A HMRC spokesman says: “HMRC confirms that adviser charges payable in connection with annuity purchases do not affect the maximum tax free lump sum payable.

“The amount of the tax free lump sum is not reduced as a result of these adviser charges whether they are paid by the pension scheme or by the insurer providing the annuity.

“HMRC intends supplementing the existing pensions tax guidance to clarify the position shortly.”

The new rules will apply to all customers who pay their IFA via adviser charges, regardless of whether the annuity is bought from the incumbent provider or the new provider.


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