News article

Rowanmoor Pensions urges Pensions Minister to take action over pensions trap

11 June 2010

Rowanmoor Pensions warns that HMRC's interpretation of the rules regarding the change in Normal Minimum Pension Age on 6 April 2010, could have serious tax implications for members aged between 50 and 55 who have crystallised benefits in an Unsecured Pension and wish to transfer to another provider. This could potentially result in members being forced to remain within poor performing schemes until they reach Normal Minimum Pension Age.

Under the new rules, members can not draw on their pension scheme benefits until they are aged 55, although those aged between 50 and 55 on 6 April 2010 already drawing benefits are allowed to continue to receive those benefits. HMRC originally confirmed that those aged between 50 and 55 who transfer provider will have any pension income they receive from the new provider before age 55, taxed at 55% as an unauthorised payment, even if they have legitimately received pension payments from their previous provider¹.

Now it would appear that HMRC has reinterpreted legislation such that the transfer itself would not be a recognised transfer and will incur an unauthorised payment tax charge, a surcharge and scheme sanction charge.

Robert Graves, Head of Technical Services at Rowanmoor Pensions, and Chairman of the Association of Member-Directed Pension Schemes (AMPS) comments:

"The original interpretation that income from the new provider would be an unauthorised payment was bad enough but at least it did not prevent members from switching providers if they did not need to draw income until age 55. This new interpretation is complete madness as it now traps members into schemes that may be providing poor service, uncompetitive charges and restrictive investments. This flies in the face of common sense, fairness and principles laid down by the FSA and DWP regulations. This is just another indication that pension simplification has failed. Whilst the new Government has many big picture issues to contend with, it must not forget to pay attention to the detail. This is a perfect opportunity for Steve Webb, the new Pensions Minister, to signal to the pensions industry and pension scheme members that he does take all aspects of his role seriously by ensuring this erroneous piece of legislation is corrected immediately."

For further information on Rowanmoor Pensions please visit the website at http://www.rowanmoor.co.uk

- Ends -

¹This would apply unless the transfer was classed as a block transfer (ie more than one member transferred at the same time from the same scheme to the same receiving pension) or if the scheme was wound up, in which case the member could transfer to a deferred annuity contract (section 32 buyout plan) and retain their lower Normal Minimum Pension Age.

For further information, please contact:

Rowanmoor Pensions

Robert Graves
Head of Technical Services, Rowanmoor Pensions
08445 440 716
robert.graves@rowanmoor.co.uk

Anna Hopkinson
Marketing Manager, Rowanmoor Pensions
08445 440 667
anna.hopkinson@rowanmoor.co.uk

Polhill Communications

Jenette Greenwood/Vanessa Chance/Paula Nugent
020 7655 0520
rowanmoor@polhill.com
Polhill Communications

About Rowanmoor Pensions

Rowanmoor Pensions SIPP features:

personal, portfolio based, administration service;
expert support from technical and sales consultancy teams;
extensive flexibility and choice at retirement, including scheme pension;
widest investment opportunities available in the SIPP market;
integrated links to a proven IFA investment platform;
streamlined process for settling adviser fees.

Rowanmoor Pensions was awarded best SSAS provider in the 2006, 2007 and 2008 Pensions Management Technology Administration and Service Awards.
Rowanmoor Pensions was awarded best SSAS provider in the 2008 and 2009 Moneyfacts Investment, Life and Pensions Awards.
The Rowanmoor Pensions website is www.rowanmoor.co.uk
Rowanmoor Pensions provides business financial planning, actuarial and pension advisory services to IFAs, accountants and their clients.
Rowanmoor Pensions currently employs over 200 people and administers around 4,200 schemes.
Rowanmoor Pensions is a trading name of Rowanmoor Group plc (No. 5792242).
Rowanmoor Personal Pensions Limited, a subsidiary of Rowanmoor Group plc is the scheme Administrator and scheme operator for schemes established under a Rowanmoor Pensions Family Pension Trust and the Rowanmoor Pensions SIPP and is authorised and regulated by the Financial Services Authority (Register number 458260).