Fines to be dropped for failure to alert pension providers when accessing DC pension

26 November, 2014

The UK Treasury has tabled an amendment to the draft Taxation of Pensions Bill relaxing proposals to fine pension savers £300 if they accessed one of their defined contribution pensions without contacting all of their pension providers within 31 days of doing so. Originally it was proposed that in addition to the £300 fine, a person would have a £60 a day fine applied thereafter up to a maximum of £3,000.

Under UK pensions legislation, people can generally access their UK pension from the age of 55. The UK Government was concerned that with the new pension freedoms to be introduced from April 2015, pension providers would be unable to take into account the tax implications if not notified. In particular, when flexible pensions are accessed, this will result in UK annual tax relief to be reduced from £40,000 to £10,000.

There has been concern that people may unwittingly fail to notify all of their pension providers when they access a particular UK pension pot. For example, for expatriates, some people may not be aware of all of the UK pensions they have or how to contact their pension providers. The amendment now proposed by the Treasury will extend the deadline for people to inform their pension providers to 91 days and only requires a person to contact pension providers for pensions they are currently contributing to or which they may contribute to in the future.

Photo Credit: “Calendar” is copyright (c) 2011 Dafne Cholet and made available under CC BY 2.0