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National IFA calls for ‘cooling off’ period on pension withdrawals

National IFA LEBC has reiterated its calls for savers to have a mandatory 30 day cooling off period before they can take more than their tax free lump sum out of their pension.

Yesterday, HM Revenue and Customs stood by its position that withdrawals in excess of 25 per cent of a pension fund should be taxed on an emergency basis and then reclaimed.

However, LEBC says that in light of the situation, non-advised customers need more information about the tax implications before they take their cash so they are not hit with unexpected bills.

The advice firm also highlights that the money purchase annual allowance will kick in if the saver once to put more into their pot in the future, meaning more tax can add up.

LEBC director of public policy Kay Ingram says: “We want those who do not take advice before accessing their pensions to be given a clear warning about the tax due on their savings and the restrictions which will apply to any future tax-exempt pension savings. A simple statement and a cooling off period would enable them to decide whether they want to pay a large tax bill and whether they are willing to forego future pension savings.

“The current system means that many without the benefit of professional advice are presented with a large unexpected tax bill and restrictions on building their pension savings in the future. These rules can severely reduce their retirement savings and a warning of this before it is too late is only fair.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. There is a cooling off period for ‘exercising, for the first time, an option to make income withdrawals’ e.g. taking tax free cash. The customer must return the tax free cash and any income taken to the provider within 30 days to cancel the variation of the contract to take income withdrawals – COBS 15.2.1R.

    Customers should also be given a warning about the consequences of their actions and the benefits of taking financial advice.

  2. You can lead a donkey to water.

    You can not make him/her drink.

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