In a development that underscores the complexities of pension legislation and the challenges of implementing policy changes, HM Revenue and Customs (HMRC) last week issued a crucial emergency communication.
This notice was aimed at people reaching their intended retirement age or with plans to draw funds from their pensions.
It advised those in specific cases to postpone taking their pension benefits.
The reason for this urgent call was to address inaccuracies in the legislation concerning the abolition of the Lifetime Allowance (LTA).
HMRC’s announcement, on April 4th, was merely two days before the planned scrapping of the LTA and shows how poorly the process has been handled.
Who Is Affected?
The good news is that the announcement only impacts a minority of cases.
However, anyone in the following circumstances should request a delay to their payment/defer their request to transfer:
✔️ Those with scheme-specific tax-free cash protection.
✔️ Transfers involving enhanced protection.
✔️ Cases combining enhanced and primary protection with protected lump sum rights exceeding £375,000.
✔️ The payment of lump sum death benefits from funds crystallised before April 6, 2024.
✔️ Any transfers from drawdown to a Qualifying Recognised Overseas Pension Scheme (QROPS).
✔️ Transfers to a QROPS encompassing benefits accrued before April 2006.
When Will It Be Resolved?
At present, HMRC has not provided a definitive timeline for when these issues will be resolved.
However, it is anticipated that drafting the necessary regulations and obtaining Parliamentary approval could take approximately two to three months.
This situation is one that I am obviously monitoring closely, and I will provide a further update as soon as more information becomes available.
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