Richard Mattison: Pension changes bring new risks

Richard Mattison, director at SSAS specialist Whitehall Group, comments on the scrapping of the Lifetime Allowance, the raising the Annual Allowance and the unintended consequences they could cause. Jeremy Hunt’s recent announcement in the Budget that the Lifetime Allowance tax charge would be scrapped in his Spring Budget led to delight throughout the life and pensions industry. So too did the Annual Allowance increase, up 50% to £60,000. Furthermore, restoration of the Money Purchase Annual Allowance at £10,000 caused a sigh of relief for those who have already commenced a flexible pension. On the face of it, all this seems like very good news and a welcome boost to those high earners and others with the means to provide for their retirement, and of course NHS consultants who have retired too soon and hopefully will return to work. But what we all really need is stability and long-term planning, not tinkering with the rules on tax-free contributions. Apart from the relative stability from 2010 to 2016 when we had the one pensions minister in Sir Steve Webb - who actually understood and enjoyed the role - we have seen countless ministers come and go. Pension provision is and always will be for the long-term. But we learnt in March that the Shadow Chancellor will reverse these changes should Labour be elected next year. History has told us that well meaning policy changes often have unintended and far-reaching consequences in practice. We have seen this with pension liberation, transfers and scamming. By 2013 this had become a very serious issue and action was required to deal with scammers - and fast. However, back then the actions of HMRC and The Pensions Regulator had a negative impact on the pensions market and caused law abiding customers a number of problems. HMRC and TPR told insurance companies and providers that they were expected to act as gatekeepers for pension transfers, checking each transfer request from an unfamiliar provider and giving them carte blanche to refuse transfers if they could find reason to suspect money was being transferred to pension liberation scammers. Now, ten years later, the industry needs to be very careful, particularly those of us in the self-invested and self-administered part of it. Financial Planners must not get carried away by the opportunities that the new tax-free contribution limits present to their clients. We must all be wary and not push the boundaries and abuse the new limits. In the SIPP and SSAS world we abide by HMRC's rules in law, but we also keep within the spirit of these rules. When HMRC feels that the spirit of its rules is being abused it steps in with fines and even criminal prosecutions. Such punishments could befall both advisers and providers as we have seen in the past. When the regulators step in and close-down schemes, clients lose their pension funds. This is what happened with the AXA Family Suntrust SIPP. Value was shifted from one family member to another to avoid tax charges, HMRC concluded, and the scheme was wound up and sold off. As we enter the new Consumer Duty regime this summer, we must be vigilant and make sure that the added flexibility the new policy gives pension savers, advisers and providers is not abused. Once HMRC scrutinises where the huge increase in tax-free contributions are invested - and we know HMRC will scrutinise - then trouble follows and customer outcomes suffer. Richard Mattison ACII Dip PFS was raised in the West Country before attending the University of Reading. He started his financial services career in life insurance in 1988 before starting work at a SSAS business in 1990. Since then he has specialised in the field of SSAS and SIPP. He is an enthusiastic music lover with a special affection for Elvis Presley. email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Richard Mattison: Pension changes bring new risks

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