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Topics: Tax relief| HMRC
A change to pension anti-forestalling rules could restart the pension transfer market for high earners.
HMRC has relaxed its initial rules, which have crippled the transfer market among the wealthy since April.
The changes to pension tax relief, announced in last year's Budget, introduced rules which meant high earner transferring their pension arrangement to a new provider would lose their contribution history and be forced to pay tax.
Those earning over £130,000 a year would only have been able to claim tax relief on a maximum of £30,000 without a regular contribution history. The pensions industry had criticised HMRC's original decision to disregard contribution history when a high earner switched scheme or provider.
However, today's legislation, SI2010/429, means pension contribution histories will be maintained. SIPP providers are hopeful this will re-open the pension transfer market for high earners, which shut down in April following the introduction of anti-forestalling rules.
High earners will be able to protect their contribution history when transferring their money to another pension arrangement, provided they conform to some rules.
The new pension arrangement must be started within 3 months of the old arrangement ending and payments must be made at least quarterly.
However, high earners will only be able to make a single switch and protect their pension. Any further switches will result in the loss of any contribution history.
Richard Mattison, business development director at The IPS Partnership, says: "This was yet another oversight by HMRC which has thankfully been rectified.
"However, we are quite late in this tax year already, and it will be tough for high earners to switch their pension before April."
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| Comment | Anti-forestalling rules relaxed for pension transfers |
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NOR ILL THOUGHT OUT - JUST NOT THOUGHT OUT
The people who have the ear of the politician who can change things are just downright thick! Just keep kicking the hands that feed them. Private sector profits propping up the overpaid public sector lazy so and so's for their wages and pensions. Keep this up much longer and most decent profit makers will leave the country.
Posted by: paolo standerwick
Stop messing with my study
I think someone in government just likes to annoy the IFA community. Tell them all to get qualified by 2012 then change the rules on pensions massively 3 times in less than a year. Im fed up of writing this article up for my diploma, im having to change it every couple of weeks and theres another month before its due in!
Posted by: Kev S
"Worth their salt!"
No, Neil Duthrie, most advisers worth their salt would not necessarily organise contributions for high earners on a single or variable annual premium basis simply because some high earners are also high spenders and need the discipline of monthly contributions. Most advisers worth their salt would have set up as large a monthly contribution as possible, with commission on a single costed basis!
Posted by: Chris Leach
Some credit where due
Whilst I can understand the earlier comments concerning "another rule change" and agree entirely with the ridiculous complexity of pensions legislation, this change is at least a sign that maybe the legislation makers have listened to a sound arguement that I have been making for years. Why does each change made have scheme specific protections. Early NRA's scheme borrowing in SIPPs, etc, all of these are barriers to the individual having free choice about where their pensions are invested. The removal of this specific protection might be a wake up call and focus any new legisaltion principally on the consumers best interests and not the tax take and political points scoring.
Posted by: Martin Tilley
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All ill thought out.
How many clients actually 'benefitted' from the contribution history 'concession'? Most advisers worth their salt would organise contributions for high earners on a single or variable annual premium basis, which were excluded. If, however, the client was 'lucky' enough to use an adviser who sold massive monthly premiums (not for commission purposes of course) he benefits from the protection. What a farce.
Posted by: Neil Duthie