Pensions - Articles - Paying pension tax charges is not always a bad thing


The common perception is that people should do all they can to avoid paying these charges. This can lead to some people choosing to leave their pension scheme to prevent further benefit accrual. However, according to the mutual insurer there are instances where paying the charge is in the clients’ best long term interests.

 The firm has produced a paper, Why paying a tax charge isn’t always a bad thing, highlighting how advisers can set about giving sound advice to clients in this situation and sets out suggested procedures for working out whether a client is better off financially by being in or out of their scheme.
 
 Both the annual and lifetime allowances have been reduced considerably in recent years which mean the number of people potentially affected has grown. While it is often seen as something only affecting high net worth investors, people with long term service in defined benefit schemes, such as teachers and doctors, are also often affected.
 
 Clare Moffat, head of business development at Royal London Intermediary, said: “It is important that people realise there is nothing inherently wrong in paying one of these charges. They aren’t a punishment for bad behaviour; they are simply the mechanisms HMRC uses to claw back any tax relief the member has enjoyed which exceeds annual or lifetime limits. Those affected need to be made aware of the potential impact leaving a scheme might have on their long term retirement planning. They could miss out on employer contributions or find they lose valuable death benefits. This guide highlights the key issues advisers need to consider and suggests processes they can follow to determine whether a client is better off financially by being in or out of their scheme.”
  

Back to Index


Similar News to this Story

Suggestion that State Pension Age should increase to 75
In response to the recent suggestion that the state pension age should increase to 75, Aegon calls for Government to confirm pension freedoms will be
GMP Equalisation soars to top of Pension Schemes To Do List
New figures from Equiniti reveal that GMP Equalisation has rocketed in importance for pension schemes following the landmark Lloyd’s case earlier this
XPS launch Competitive Tendering support for Trustees
In June 2019 the Competitions and Markets Authority (CMA) published its Order which implements the remedies that were set out in the CMA’s final repor

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.