Reporting on Pensions Freedom – Hefty Fines for the Unaware
According to reports, the new pensions freedoms have resulted in £1.8 billion being withdrawn from pension funds – and that’s just in April and May! What people may not be aware of is their responsibility to report their exercising of pensions freedom. Read on to find out more about the reporting requirements and the possible fines that can result from not meeting the deadline.
The new money purchase annual allowance (MPAA) has been introduced because of the new rules.
It doesn’t apply to someone who hasn’t flexibly accessed their money purchase pension fund, and they will continue with the normal annual allowance. However, taking an income from a flexi-access drawdown fund or taking a new UFPLS will trigger the MPAA rules.
What might not be so familiar with those people affected is that there are new reporting requirements which means that anyone who accesses their pension savings has to let their current pension providers know that they will now only be entitled to contribute the new £10,000 annual allowance and not the full amount of £40,000. This applies to schemes that are currently being contributed to or are subsequently contributed to.
The time frame they have to let their providers know is 91 days of exercising the new freedoms.
If someone doesn’t meet the deadline, they will be looking at a fine of £300 plus an additional amount of £60 for each day they go beyond the deadline date.
These are hefty fines if someone is not aware of the new reporting rules which could be the case for those already in flexible drawdown, as these clients will not necessarily be told of the new rules – unlike those moving into FAD from April where the scheme administrator has a duty to let them know.
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Over to You…
What do you think of the new reporting requirements?