HMRC Advises Delay Taking Pension Benefits Until LTA Laws Fixed

HMRC has suggested today that some people affected by lifetime allowance (LTA) abolition and changes should delay taking pension benefits or transferring pensions until some ‘holes’ in pension law have been fixed.

What Pensions are Affected?

• Scheme specific tax-free cash protection.
• Transferring any pension with enhanced protection.
• Enhanced and primary protection cases with tax free cash entitlement greater than £375,000.
• Payment of lump sum death benefits to beneficiaries from pensions that had already been crystallised e.g., in flexible drawdown before 6 April 2024.
• Pension transfers (already in drawdown) to QROPS.
• Any transfer to QROPS for pension benefits built up pre-2006.

Comment

This will not affect many but will affect some. 

Many are saying that these changes were rushed through, but we suggest HMRC was given notice in the Spring Budget 2023, so they have had a year to plan for this.  It just tells you how much of a ‘bodge job’ taxation now is. 

In 2006, they called it ‘pension simplification’, but pension laws and taxation are certainly not that.  All we can suggest is that if you are affected (or if you do not know whether you are or not), you should contact us for professional advice before acting.

It is appalling that HMRC is telling people to hold back, and particularly for those that are waiting for pension death benefits, at such a difficult time.