HMRC has been forced to issue a warning to savers after a last-minute change to its new pension tax system, which has seen the Lifetime Allowance scrapped for a lower limit on lump sum payment
HMRC has been slammed with complaints following last-minute alterations to its new pension tax system, which has replaced the Lifetime Allowance with a lower limit on lump sum payments. HMRC recently advised some clients to postpone taking their pension benefits or transferring.
The tax authority cautioned individuals to hold off until it can rectify incorrect legislation related to the abolition of the lifetime allowance. HMRC provided examples where certain individuals should delay making changes to their pensions until LTA regulations are corrected.
Andrew Tully, technical services director at Nucleus Financial, expressed his frustration to industry publication Pension Expert: “To suggest at such a late stage that people should delay taking benefits or transferring shows how poorly these changes have been implemented.
Mr Tully added: “We are only a few days away from implementation so some advisers and customers will have made plans and committed to use funds. Now HMRC is effectively delaying payments to customers or stopping them taking certain actions while it fixes incorrect legislation. It’s a bit of a shambles.”
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A government spokesperson responded: “For the vast majority of schemes and their members, all the legislation necessary to implement the LTA abolition was published in Finance Act 2024. Feedback from industry has highlighted a few areas where further technical changes are required.”
The taxman added: “HMRC is committed to working closely with industry to support schemes and members where they would benefit from waiting for these changes.”
HMRC added that while the timeline isn’t set in stone, it will “confirm timings as soon as possible, however it will not be before April 6, 2024. The regulations will be retrospective to this date.”
Tehy added” Furthermore, recognising the need for clarity amidst the changes, it said: “Given this, HMRC is also aware that industry will require guidance on how to operate affected areas during the interim period. Guidance will be provided as soon as possible.”
There are concerns given the rapid pace of pushing through legislation to put an end to the lifetime allowance. On the other hand, voices from the industry stated there has simply not been enough time to implement such a substantial change.
