Tax position re pension redress offer

blackreddennis

Thanks for your response Mark. My pension advice was 2001 so it may be slightly different as I'm outside the dates. Your right it's grief. I will update the chain when finally resolved to help others.

kagsy107

blackreddennis said:

Thanks for your response Mark. My pension advice was 2001 so it may be slightly different as I'm outside the dates. Your right it's grief. I will update the chain when finally resolved to help others.

Did you get this resolved? I have the same issue. Thanks 

blackreddennis

Sadly I'm a long way from resolving the issue. It looks like you will be taxed on your total redress payment less the 25% which is free from tax. This will be taxed in the tax period you received the payment, what has already been taken off you is only a down payment. I am awaiting a call from HMRC to confirm this. I am hopeful that this consequential loss may be reclaimed from the Bank who miss sold the pension but I know this will be a fight as they have been awkward from the outset. I was also offered an independent assessor to help with such a claim,  avoid, as they are paid by the Bank thus clearly a conflict there. They set me back rather than be helpful. I expect this to drag out at least 6 more months. A point to remember if you received 8% interest on the compensation element they will try to say this covers every expense known to mankind, don't claim the small items, just go for the big ones, especially tax related like income tax, working tax credits and loss of child benefit, dependant on the redress payment. Expect a lot of grief, but it will worth while. Finally, as much as I didn't want to do it i contacted HMRC, they have now put me on self assessment, this is hassle but may well help in putting my consequential losses claim into the large English Bank.
Good luck

kagsy107

Ah thanks. Not what I’d hoped to hear! Hope you get yours sorted. 

Manchesterunited1

Hi,
has anybody else had any luck with the pension redress, I came out of mine in 2010, I have been told the advice given to me at the time was not beneficial to me. I have now been told they have run a calculation and it has to be sent to an external auditor to be checked. I don’t really hold any hope of getting anything back as I can’t work out from what my pension was at under the DB scheme to what it is now. How do you know if you have lost out? Any comments would be appreciated. 

Thanks 

dunstonh

Manchesterunited1 said:

Hi,
has anybody else had any luck with the pension redress, I came out of mine in 2010, I have been told the advice given to me at the time was not beneficial to me. I have now been told they have run a calculation and it has to be sent to an external auditor to be checked. I don’t really hold any hope of getting anything back as I can’t work out from what my pension was at under the DB scheme to what it is now. How do you know if you have lost out? Any comments would be appreciated. 

Thanks 

You wait for the outcome that will lay it out or you pay for your own actuary (a cost you cannot recover)

blackreddennis

Hi
Prepare yourself for a battle...sorry not what you want to hear. If the pension company has accepted wrongdoing through bad advice and are asking an independent third party to review the calculations I think it is likely that you will be treated fairly as both the pension provider and third party have too much to loose by adjusting figures. Redress will be either paid to you in cash or paid into your pension pot if it can, which is fairly unlikely. Your 25% tax free amount will be deducted and the rest will be taxed at basic rate tax. Interest should then be added at 8% which is classed as compensation and not redress, it’s important to know the difference between these two payment terms. Depending on the amount received, CG13020 or CG13021 may apply, CG13021 is a nightmare so fingers crossed it doesn’t effect you. Be aware of consequential losses, the 8% covers minor expenses however tax and certain legal fees can be reclaimed, I’m still battling them out. If your a standard rate tax payer other than consequential losses that should be it, if your a non tax payer let the battle commence, trying to get it back is a nightmare, two years on I’m still battling. The interest at 8% may cause issues if you receive Working Tax Credits or Universal Credit as it has to be declared in the tax year received if you get a cash payout, also you have now lost your tax wrapper, thus this is a consequential loss to consider. You should be offered professional advice at their expense, I was allocated BDO, total waste of time in my case, but take it if you get a chance, you may be luckier than myself. Good luck (A Chelsea fan)

TVAS

Will your wife be a non tax payer in retirement if so go back to the adviser and say so and ask for the tax not to be deducted. It would be helpful if she could provide evidence of other pensions. If the tax is to be deducted ask for a tax deduction certificate because they are supposed to pay the tax to HMRC on your behalf. 

izzybizzy

hi, I was hoping for advice on similar situation. Have been offered roughly 70,000 because of bad advice by financial advisor on the transfer of pension benefits. The offer was revised without the 15% adjustment for tax, as I am not working and in receipt of benefits, but would obviously lose any benefit entitlement, if I received a cash payment. I thought that it was non-taxable as redress cash payment, but not sure now, having read this thread. It can be paid into a personal pension, if I can find a pension provider that will accept a third party payment and not apply tax relief at source, but not sure yet if Aviva will accept it. Up to £40,000 per year can be contributed to a pension and can use previous years allowance, but as a non-tax payer, only £3600 per year is eligible for tax relief. Therefore if I put it into a pension, most of it will be taxed - not sure at what rate. Neither scenario rectifies my financial position had the bad advice not occurred. I have suggested that they should be liable for the tax that needs to be paid, if it goes back into a personal pension, but they do not agree. If the payment is made in cash and I no longer have any financial support or if I need to pay tax on pension contributions, do these count as consequential losses and are they liable? thanks for any advice  Izzy

blackreddennis

Hi Izzy, whilst I’m no tax expert in my case the following happened. My offer started at a gross figure, in your case £70000, then the 25% tax free amount was deducted to give you a net figure. The net figure then had 20% notional income tax deducted leaving a balance. This balance then had 8% interest added to it to give the final balance to me. I then reclaimed the income tax on the gross 8% interest back from HMRC as i was a non tax payer. You say your on benefits, sadly I lost Working Tax Credit and had to refund as this is classed as income in the tax year. With regards to you paying back into pension, if you have no income you can only pay in £2880 which is taxed up to £3600 by the government, the £40000 is the max anyone can claim tax relief if your salary is that amount or above. I tried claiming the loss of WTC as a consequential loss however I was told no and if i wanted to fight it they would fight it all the way. You wont need to be concerned with IHT as the first £500k is exempt from tax. I think you should look at the positives that you have extra cash and invest it wisely. Good luck.