25th November 2014
The Treasury has axed an onerous requirement on savers to contact all their past pension providers when taking up the new freedoms to access their retirement funds which come into force next year.
The policy U-turn, came in amendments tabled by the Chancellor George Osborne yesterday, according to Money Marketing, the financial trade publication.
Last month, the Taxation of Pensions Bill amendments told savers they must contact all their previous pension providers within 31 days of using the new freedoms.
This was to make providers aware of the tax implications because when pension pots are accessed the annual tax relief allowance is cut from £40,000 a year to £10,000. But experts complained that the rules were unworkable and would have created chaos.
The latest amendments propose that savers will only have to contact providers they are currently contributing to and those that they contribute to in the future. They will be given 91 days to do so.
However, those that miss the deadline could be hit with a £300 fine, plus £60 per each subsequent day of delay. A further £3,000 fine may be applied if the information they submit is inaccurate.
Labour attacked the original proposals in parliament.
Following the U-turn in policy, Shadow Treasury financial secretary Cathy Jamieson said: “The Government finally caved in from pressure from Labour on fees and charges in pension saving schemes, and now they are being forced to follow Labour’s lead on arrangements for people accessing the new freedoms.
“I told the Government that placing a requirement on individuals who had flexibly accessed their pensions to contact all their pension schemes was disproportionate, as it would have left people searching for paperwork for schemes they may not have paid into for years.
“The Government now needs to ensure that a robust guidance guarantee is in place and that people are not hit by excessive charges.”
Malcolm McLean, senior consultant at Barnett Waddingham, said:“This is quite a major U-turn by the Treasury but is welcome nonetheless.
“Many of us had pointed out that the original proposals were unworkable and actually quite unnecessary.
“They placed an unreasonable onus on individuals to track down all their pension holdings and to do so within a very restricted timescale.
” The revised rules are now much more pragmatic whilst still providing the necessary protections the Treasury require. This is clearly a victory for common sense.”