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Savers breaking Budget pension disclosure rules face thousands in fines

People who access the new Budget pension freedoms but fail to alert their providers could be hit with fines running into thousands of pounds.

Last week, Money Marketing revealed how the Taxation of Pensions Bill introduces a requirement for individuals to pass on a statement to all their pension providers within 31 days when they flexibly access their savers from April next year.

Now further guidance on the Bill reveals people who fail to contact all their providers within a month risk a penalty of up to £300 initially and then up to £60 a day until the information is passed on.

On top of that, if the information provided is incorrect individuals could face an extra fine of up to £3,000.

From April 2015, members who use the flexibilities introduced by the Budget will be sent a statement from whichever pension provider they access the freedoms through.

The statement will explain that the member’s annual allowance has dropped to £10,000 meaning any contributions over that amount will be subject to a tax charge. It is then the responsibility of individuals to send this information to any other pension scheme they are a member of within a month.

Experts say loading such a heavy administration burden onto individuals is “unworkable” and needs to be revisited.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Which ‘Experts’ feel that photocopying a piece of paper and sending it to maybe a handful of pension providers is a heavy administration burden, and ‘unworkable’???

  2. I think it’s about time the UK population grew up and started to take responsibility for its actions.

    If the Flexi Access pension provider is producing a statement for individuals (who utilise the facility) and is clearly informing/reminding them that it has to be sent to all their other pension providers (with a note of the consequences of not so doing), the provider has done its job. It is then down to that individual to carry out that task. What is wrong with that?

    Of course, there is the Pension Advisory Service, MAS and Citizens Advice Bureau to help vulnerable people to the appropriate course of action (for free) and our (financial advisers/planners) clients will receive our help, regarding all elements of this, because they pay us for our advice.

    Quite frankly, if a person is capable of making the decision to take up Flexi Access to their pension(s) without external advice, they should be more than capable of sending a form to another of their pension providers (if they have more than one).

    This nanny state we live in is becoming more ridiculous by the day.

  3. Agree with the sentiments above. Although it might be worth noting that it would potentially take some providers at least 31 days to issue this document…

  4. Neil: What about people who build up a tiny auto-enrolment fund with some provider or other from a year or so’s work and then forget about it when they leave the job?

  5. @ Sascha – like I said, people must start taking responsibility, get organised, use a file. I don’t see that as an excuse. How do some people get through life?!

    @ Paul – good point and very valid in terms of whom HMRC is going to blame & fine.

  6. The only issue would be if a client has “lost pots”. We’ve certainly had trouble on occasions tracking down client’s older pension benefits where a company has been bought out several times and no one seems to know what happened to the old scheme, especially if it was with a small life company that’s also been taken over several times too.

  7. Seems to me wholly excessive to fine people such large amounts for administrative failings which potentially will have no impact whatsoever. The fines should be massive for those who abuse the new rules i.e. those who pay in more than £10,000. But quite how someone failing to send a form to an AE provider looking after a pot for £1,000 should be fined several thousand pounds is beyond me. Rules are always broken, but why fine people so MUCH when the only transgression is to fail to send a piece of paper? The “crime” is to exceed the new limit of £10,000, and that is what should be fined heavily. Think about it people.

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