Pension administrators could start deducting tax directly from people’s retirement funds to pay to HM Revenue & Customs if they are unable to contact investors.
Following the launch of the new pension simplification rules last April, the onus is now on administrators to ensure that their clients pay tax to the Revenue if their fund exceeds the new ‘lifetime limit’ of £1.5m and triggers the set tax charge.
But, in some cases, administrators may even levy a charge on funds below the limit if they have reason to believe investors have other pension pots. If administrators are unable to contact policyholders, the new rules state that they will have to make a judgement on whether that person is likely to exceed the lifetime limit and owe the Revenue money.
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The lifetime allowance for retirement funds is set at £1.5m tax-free. This can be made up of lots of different pension pots or just one large fund.
If the scheme administrator is deemed not to have deducted a charge when the Revenue thinks that it should have, then the charge will apply retrospectively.
The Revenue view is that the scheme administrator is entitled to make a sensible commercial decision about whether any tax is likely to be due.
If you would like to find out more, please email or contact us for further information.
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