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.