Skandia is warning that advisers must check if clients consolidating occupational pension schemes are entitled to more than 25 per cent tax-free cash before initiating a pension transfer.
Any client who was a member of an occupational scheme before A-Day may be entitled to more than 25 per cent taxfree cash from this scheme. If a client transfers two occupational pensions that each have a higher cash entitlement to a single scheme, the tax-free cash entitlement could be significantly reduced.
But Skandia says by selecting a provider which has multiple registered schemes available or moving to a single investment platform, the advi-ser can ensure the client does not lose a tax-free cash entitlement through consolidation.
Pensions marketing man-ager Nick Bladen says: “Many clients will simply not be aware that they can take more than 25 per cent cash and there is a real risk that clients will lose that entitlement to tax-free cash through a simple oversight. It is not just clients with big pension funds who are affected either. Simply put, paying tax on pension funds when there is no need is crazy.”