A nice little earner for HMRC.

Very sadly, George Cole, the actor whose most famous role was as Arthur Daley in the TV series Minder, has passed away aged 90. Arthur Daley was a cockney wheeler dealer whose catch phrases included “A nice little earner”.

The pensions freedoms brought in by the coalition government and subsequent changes by the current government have come at a price. I would describe myself as an expert in pensions, but even I am struggling with the complexity of the new arrangements. Law usually changes slowly with plenty of time to adjust and understand what is going on. Changes at the moment seem to happen at the sort of speed demonstrated by Australia’s batting collapse in the Ashes yesterday.

From 6 April 2015, there are special rules where an individual accesses any defined contribution funds flexibly (e.g. takes an uncrystallised funds pension lump sum or income from a flexible access drawdown fund) under the new regime (the money purchase annual allowance).

The money purchase annual allowance is £10,000 and if this is exceeded for a tax year individuals will have a reduced £30,000 annual allowance for the remainder of their non-money purchase pension savings for that tax year.

Individuals who access their defined contribution pensions savings are obliged under the Registered Pension Schemes (Provision of Information) Regulations 2006 (as amended) to notify their scheme administrator (normally providers in contract based arrangement or trustees in trust based schemes) within 91 days  so they are alerted to the fact that the reduced £10,000 annual allowance applies. You only have to alert providers and trustees of schemes you are contributing to. Failing to do so can result in a fine of £300 increasing by £60 a day until a breach is rectified. There are exceptions which I will not go into.

A report in Money Marketing suggests both that individuals are not aware of the new reporting requirements, and that providers in particular, have received very few notifications to date given the scale of withdrawals from defined contribution pension pots in April and May alone.

There is a real risk that individuals in the rush to use the new flexibilities may be sleepwalking into an HMRC fine, and the failure to carry out this simple task may result in a nice little earner for HMRC!

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