Experts have branded Government plans to load new administration burdens onto pension savers in the wake of the Budget reforms “unworkable”.
The Taxation of Pensions Bill, published yesterday, includes proposals to force pension schemes to write to clients who access the Budget freedoms within 31 days telling them when they accessed the flexibilities and the effect this will have on their annual allowance.
It will then be down to the individual scheme member to contact all their other pension providers telling them they have accessed the freedoms under another scheme.
Once an individual accesses the freedoms their annual allowance will drop from £40,000 to £10,000.
AJ Bell technical resources manager Gareth James says: “The reason for all this is so that, if an individual pays more than £10,000 to any money purchase scheme in a tax year at a later date, that money purchase scheme knows that it will have to issue a statement to that member about the level of their savings – similar to the statement that providers now have to provide to savers when they pay in more than £40,000 in a tax year.
“The issue with this is that the Government’s own analysis shows that only 2 per cent of over 55s pay in more than £10,000 a year. So all of the information is being shared just in case the individual is one of the 2 per cent of over 55s who might benefit from a greater than £10,000 savings statement at a later date.”
Talbot & Muir head of technical support Claire Trott says: “This is a huge amount of admin to place on the shoulders of individuals, particularly if they don’t have an adviser. It looks totally unworkable.”