The Investing and Saving Alliance (TISA) has welcomed regulatory clarity on pension cancellation rights but warned that an outright ban on reversing tax-free cash withdrawals could prove “unduly harsh” for savers.
His comments follow co-ordinated statements from HMRC and the Financial Conduct Authority (FCA), published on Thursday, confirming that once tax-free cash has been withdrawn, the decision is irrevocable. The clarification sets out how tax law interacts with regulatory rules on cancellation rights.
The Investing and Saving Alliance head of retirement Renny Biggins says: “A pension pot can often be an individual’s largest asset, and the decision to take Tax-Free Cash (TFC) is one of the most significant decisions they can make. The clarity from HMRC and the FCA regarding cancellation rights on TFC is welcomed and will enable firms to focus their communication strategies on ensuring consumers are fully aware of the irreversible nature of this decision.”
But Biggins cautioned that “to not allow any reversal, even when circumstances change and withdrawal is retrospectively deemed an inappropriate action, seems unduly harsh and not in keeping with the goal of achieving fair outcomes for consumers.”
Biggins added that Tisa will continue working with the regulators and its members to address operational issues and ensure consumers are properly supported in making “one of the most important financial choices they are likely to ever make.”