HM Revenue & Customs (HMRC) is advising certain pension holders to delay benefit withdrawals or transfers until the right measures are in place for the planned abolition of the Lifetime Allowance (LTA), which was supposed to take effect on April 6, 2024.
HMRC recommends postponing benefit withdrawals or transfers and urges pension schemes to advise members to defer requests for transfers or payments pending further regulatory clarity.
In the most recent newsletter from HMRC, people who fit into certain categories, such as those who have scheme-specific tax-free cash protection, enhanced protection and primary protection cases with lump sum rights over £375,000 and pre-April 2006 benefits in QROPS transfers, should postpone benefit withdrawals or transfers.
Experts believe this is a result of the legislation’s quick implementation, which has left little time for necessary adjustments. According to them, the lack of timescale for resolution increases uncertainty, as it may take two to three months to create regulations and get legislative approval.
Nucleus Financial technical services director Andrew Tully says: “To suggest at such a late stage that people should delay taking benefits or transferring shows how poorly these changes have been implemented. We are only a few days away from implementation so some advisers and customers will have made plans and committed to use funds. Now HMRC is effectively delaying payments to customers or stopping them from taking certain actions whilst it fixes incorrect legislation. It’s a bit of a shambles.”