Thousands of consumers are at risk of racking up HMRC fines as figures show few savers are aware of new reporting requirements.
Last year Money Marketing revealed plans for a new rule that meant people who accessed their pension savings would have been required to alert their providers to the fact they are entitled to a reduced £10,000 annual allowance.
The Government subsequently watered down the proposals so savers only have to inform providers they are still contributing to.
However, the £300 on-the-spot fine – which also increases by £60 a day until resolved – remains in place.
Yet providers report very few customers fulfilling the requirements, four months on from the introduction of the freedoms in April.
Standard Life and Aviva have each received around 120 notifications from customers, while Zurich have had less than 30.
Yet Association of British Insurers figures show £1.8bn was withdrawn from pension pots in April and May alone. This includes 65,000 cash withdrawals and 170,000 withdrawals from income drawdown policies.
Each customer accessing their pot for the first time needs to alert providers within 91 days.
Standard Life head of pensions policy Jamie Jenkins says: “What could easily be overlooked as a relatively trivial task may well result in a fine equivalent to having your car towed away. It’s imperative we make the signposting clearer than parking restrictions.”
Zurich head of retirement propositions Rod McKie says: “Pension providers already write to customers advising them to notify any other schemes, but the message doesn’t appear to be getting through. We don’t want to see savers receive unexpected fines by HMRC for taking advantage of the reforms.”
Dobson and Hodge director Paul Stocks says: “The problem is consumers don’t know what they don’t know. They don’t read the small print and this is a new detail that they are very unlikely to be aware of if. These things do need policing because you have that reduction in the annual allowance.
“I’d like to think HMRC don’t do things deliberately to catch people out, but in reality people don’t even realise there is a consequence and can get caught out by it.”