Sipps specialist warns about protection options

A Sipps specialist has warned that failing to make clients aware of options to protect their pensions against significant tax charges could haunt them in future. Talbot & Muir said some advisers have taken on new clients only to find out they had no protection and it stressed the importance of informing them in a timely manner.Claire Trott, head of technical support at Talbot & Muir, said some clients had no idea about the need for protection since A-day in 2006 – when sweeping pension changes were made by the Government. A lifetime limit on pension funds was introduced, with heavy taxes levied on amounts above the £1.5m cap. This is set to drop to £1.25m from next April.She said: "There have been many instances where I have spoken to advisers who have taken on new clients since A-day to discover that the client had no protection in place and worse; no idea they may have even needed it in the first place."The previous adviser may have reviewed the client based on the information they held for them, which would have indicated no protection was needed."Later on they would discover the client may not have told them about all the pension assets they held.{desktop}{/desktop}{mobile}{/mobile}"If the client had been fully aware at the time regarding the basics of the protection then they may have come forward with the extra information at the time, saving thousands of pounds in tax charges down the line."The tax charges involved are significant, take a client with £1.2m now, with just 3% growth on their fund they could have a tax charge of in excess of £75,000 in just five years if they did not apply for Fixed Protection in 2014."The issue is relevant with advisers looking at their client bank deciding who will and will not be in need of fixed or individual protection for 2014, she added.

Sipps specialist warns about protection options

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