Tax-free cash penalties following Budget reforms reviewed

At Enable in Bishop’s Stortford we see that our clients are all pretty clear now that the Budget changes, which take effect from April next year, mean anyone aged 55 or over will be able to take their entire pension pot as cash.

However it might not have been so clear about some of the cash penalties until many insurers raised some concerns about HMRC rules that would prevent savers from putting tax-free lump sums back in savers’ pension pots as by doing so it could have lead to unauthorised payment charges. But now we can be clear on that too as HMRC have issued guidance confirming that it will not impose tax penalties in this situation. 

The Government has also extended the amount of time savers who have taken a tax-free lump sum have to choose a retirement income option up from 6 months to 18 months.  Under current rules, if a decision is not made within 6 months the lump sum is taxed at 55 per cent.

Treasury exchequer secretary David Gauke says: “At Budget the government announced the most fundamental change in the way that people access their pension in almost a century, ensuring that over 400,000 people who have worked and saved hard will be able to access their retirement savings more flexibly. “However, we recognise that decisions people take regarding their pensions are important and take time.

This extension to the decision making period will give people the opportunity to take full advantage of the new flexibilities introduced at the Budget.” Aegon regulatory strategy manager Kate Smith says: “Now HMRC has provided the clarity we’d hoped for we’ll move forward immediately to support customers who would like the chance to reflect on their retirement decisions in light of the Budget changes and proposed new tax rules.”

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
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