The onus will be on SIPP providers to ensure investors meet flexible drawdown requirements, Her Majesty's Revenue and Customs (HMRC) has confirmed.
Flexible drawdown, which became available from April this year, allows investors to withdraw unlimited amounts from their pension fund provided they meet a minimum income requirement (MIR) of £20,000 per year.
Following the introduction of the new rules, the Association of Member Directed Pension Schemes (AMPS) sought clarification from HRMC on how much responsibility providers have for ensuring investors meet the MIR.
In an e-mail to AMPS seen by IFAOnline, HMRC confirmed SIPP providers must go some way towards ensuring investors are suitable for flexible drawdown to avoid a punitive tax charge if an investor is later found to be ineligible.
Providers must take "reasonable steps" to satisfy themselves an individual satisfies the MIR, and keep an audit trail to prove those steps.
Scheme administrators must decide if they find an investor's MIR declaration satisfactory, or if further proof is required, HMRC said.
When members try to use unusual or unfamiliar pension arrangements for the MIR, SIPP operators should demand to know how those schemes work, HMRC said.
The Revenue stated categorically that if SIPP providers know a member plans to use an inappropriate source of income for the MIR, it should not allow them to access drawdown.
Martin Tilley, sales and marketing director at Dentons, said: "I was concerned some providers might be taking too lax a view on the declaration or evidence required to satisfy the MIR.
"However these guidelines put the onus on the provider to take reasonable steps to ensure that the MIR is being met and flexible drawdown is not being abused."
The MIR has caused some controversy as providers struggled to pin down which types of income could make up the requirement and which could not.
In July HMRC confirmed RPI-linked annuities would count towards the MIR, after previously discounting index-linked annuities in earlier drafts of the legislation.
In March, HMRC said scheme pensions with fewer than 20 members would not count towards the MIR either.
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