As I write this article we have a new coalition government and the ex-leader of the Conservative party, Mr. Iain Duncan Smith has been appointed as the new Secretary of State for Work and Pensions.
Now Mr Duncan Smith obviously has a lot in his "In Tray" to deal with in the coming weeks and months. We are likely to see new policy introduced in areas such as the compulsory annuitisation age, the state pension age and tax relief on pension contributions, to name just three.
In this short article however I would like to add another item to Mr Duncan Smith's pending pile which I will classify under the heading of "fairness and common sense".
As we are all aware the NMPA rose from 50 to 55 from 6th April this year. This was, quite rightly, well signposted in advance and as a result many individuals between 50 and 54 who were caught by this legislation took perfectly legitimate action to access their pension funds before the 6th April in order to avoid being "locked in" until their 55th birthday. For many their choice was to crystallise their pension via an Unsecured Pension when they were above the NMPA of 50.
HMRC has however now stated that according to its interpretation of the FA 2004 rules any pension benefits that may be paid as a result of an unsecured pension being transferred to a new provider or where the investor wishes to purchase a lifetime annuity or scheme pension will be subject to pension rule 1 in s165 FA 2004 and therefore the individual needs to meet the prevailing normal minimum pension age of 55 or face an unauthorised payment charge.
Now under the strict interpretation of the law I am sure that HMRC is correct but couldn't HMRC, in this instance, apply a common sense interpretation rather than a purely legal one? Where is the downside to allowing individuals who now find themselves in this position a dispensation so that for those who had attained NMPA and crystallised pension benefits using an unsecured pension they can then transfer this to a new provider or purchase a lifetime annuity or scheme pension without facing unauthorised payment charges for doing so?
I realise that my request is a forlorn hope and that as HMRC have provided their interpretation of the law as it stands they probably won't budge unless the law is changed - which is a remote possibility to say the least, but I was always told by my mother that if you don't ask, you don't get!
Andrew Gadd is head of research at The Lighthouse Group
Oversees £30bn of advised and D2C assets
£1bn business since inception
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