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12 Nov 2014

New Pension Ruling “Unworkable” For The Less Wealthy

The Government´s plans to impose fines of up to £300 on savers who access their pensions like a bank account have been deemed “unfair” and “unworkable” by a leading pension expert, the Financial Times reported recently.

The legislation is just one element of chancellor George Osborne´s pension reforms due to begin next year. Under the new plans, savers will have more freedom to ‘cash in´ their pensions. However, those who access them “flexibly” could face fines if they do not notify their other pension providers within 31 days, with costs rising to £60 per day if this continues.

With savers over the age of 55 having more chances to draw money from their pensions and put it into a new one – where it will be subject to tax relief – the decision aims to prevent instances of tax leakage. This means that savers doing this will be given a lower annual savings pensions allowance of £10,000 – down from the previous £40,000.

Dr Ros Altmann, an independent pensions expert and the Government´s business champion for older workers adviser, wrote to MPs regarding the new ruling. She stated that fining savers was “unworkable” and “draconian”; and what´s more, it would “disproportionately disadvantage” the less wealthy.

“To insist on people notifying all past pension schemes that they have taken some money under flexible access would place an impossible or unreasonable burden on too many people,” she said.

“Most will have no intention [or ability] to contribute more than £10,000 a year, but could face fines just because they lack the time to trace old pensions.”

In the case of wealthier savers, they are more likely to have a financial adviser to help them with their affairs, explained Dr Altmann. But for the average customer, who may not know who they need to contact, they may find the admin a “struggle”.

“I believe the provisions of this Bill need to be amended and ideally, the requirement to notify all other schemes should be removed,” Dr Altmann advised.

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