27th March 2015
Retirees who have already put their pension into flexible drawdown could be hit by fines if they don’t report to the taxman.
Under the new pension freedom rule, those who are already taking money out of their pension using flexible drawdown plans will able to contribute £10,000 a year into their pension.
If they contribute, individuals must tell other pension schemes they are members of that they have done so and if they do not, they risk fines of £300 or more.
Failure to meet the reporting requirements within 91 days can result in a fine of £300 plus £60 for each day by which the eventual report is late, according to pension provider AJ Bell.
Gareth James, AJ Bell technical resources manager, said: ‘There are potentially tens of thousands of savers in flexible drawdown who have not been able to make contributions for a number of years who will suddenly be able to pay up to £10,000 to money purchase schemes.
‘This will be attractive to many, but will come with a sting in the tail in the form of a HMRC fine if they fail to meet the reporting requirements.’
He added that it would be ‘optimistic for HMRC to assume…that savers will somehow know about the reporting requirements without direction of some sort’.