S226 pension

pnmpeter

I have just checked into the main pension I have with Standard Life called a RAC  s226 type. And found that I have not had income tax relief added to the premiums, SA helpline have told me I should have been claiming Tax relief from HMRC, which I can’t find any record of having done, the policy was taken out in 1985 and I stopped premiums for about 5 – 10 years (1997-2007 approx)and in 2008 I wished to restart payments and increase the amount SA did this and opened a new a/c no to add the extra premiums and called it a S620 type and allowed me to restart the original payments into the old a/c.

They suggested I contact HMRC who frustrated me by not knowing what to do except to suggest I open a online a/c as they after asking their supervisor did not know what a S226/ s620 a/s are and how to make a claim for lost tax allowances or even if it’s possible, I am now retired and living on state pension and wish to continue with payments for the next few years.

I rang Pension wise who told me as my original policy was prior to regulation of brokers and that broker was closed many years ago, which leaves me with a depleted pension pot and not having filled in a tax return for over 20 years, as a PAYE with simple affairs it was not deemed necessary I’m not sure of the next steps- any ideas would be helpful!

Dazed_and_C0nfused

Have you paid any tax after 5 April 2016?

Do you have anything in writing from Standard Life confirming no tax relief (known as relief at source) has been added by them?

Are you 100% certain that no tax relief has been added by Standard Life?  The rules changed at some point and although these policies started off by being paid gross it was possible to get "relief at source" from a certain point in time (maybe 2005?).

dunstonh

And found that I have not had income tax relief added to the premiums,

You dont get tax relief added to the premiums.  Tax relief is a reduction.  Not something added on top.  However, the tax relief handling on S226 RACs is different to personal pensions.

 the policy was taken out in 1985 and I stopped premiums for about 5 – 10 years (1997-2007 approx)and in 2008 I wished to restart payments and increase the amount SA did this and opened a new a/c no to add the extra premiums and called it a S620 type and allowed me to restart the original payments into the old a/c.

From 1985 until you stopped paying, the premiums would have been paid gross with you needing to claim the tax relief. 

When you restarted the pension in 2008, it was S226s/S620s were no longer available to take out as personal pensions took over from 1988. If you had one already then you could keep paying premiums but you could not do a new one.

In most cases, if you stopped making premiums, you were not allowed to restart them unless there were very specific contract terms that were met.  You would then have to pay into a personal pension instead.

I rang Pension wise who told me as my original policy was prior to regulation of brokers and that broker was closed many years ago

Not sure what Pensionwise are doing telling you that as the issue is nothing to do with regulation of brokers or the fact the broker has closed.      Pensionwise is not really the right place to go through. It is outside of their remit and the person was probably trying to help despite not actually knowing what it meant.   So, it was probably just a guess on their part.

So, some questions...

1 - Have you checked your tax code to see if there is an adjustment to cover the contribution?

2 - Can you verify the 2008 plan. In most cases, you would expect it to be classified as a personal pension and getting tax relief at source.   If the old S226 did meet the contract terms to allow a restart then that would normally be in the same plan.  Its unusual to see a S620 (which is the effectively the same as a 226) set up after 1987.  I actually thought it wasn't possible to have a new S620 set up after 1988 and HMRCs website says its not since 1988.   So, either this new one is a personal pension plan or its a top up on the original 226 (which could be segmented with a different policy number but be part of the overall scheme).  

Personal pensions get relief at source and this becomes a non-issue if its one of those.

which leaves me with a depleted pension pot 

Luckily, it does not.   Your pension value is exactly the same whether the contributions have tax relief at source or not.

i.e. if you were paying £40pm then £40 goes into the pension.     If you get tax relief at source, then your direct debit is reduced to £32 (assuming England & Wales).   If you get tax relief via your tax code then your direct debit is £40.   Either way, £40 is going into the pension.  Hence your pot is not depleted.      It is your day to day finances (current account) that has lost out if there is no adjustment on your tax code.

So, after making 100% sure that the 2008 transaction was not into a personal pension, check your tax code and if it hasn't been adjusted then you need to contact HMRC and let them know you have been paying £x per month gross into S620 pension and not received tax relief at source and request an adjustment going forward and a refund in tax relief.      They will almost certainly only go back 6 years.

pnmpeter

Hi thanks for the replies,

to confirm a couple of things, I have not filled in a tax form for over 20 years so have definitely not claimed tax relief on these payments to SA as I did not know i was supposed or entitle to. And SA have confirmed there was not tax relief added at source or to the investment. (not sure if tax relief was ever claimed in the early years- I haven't got any records going back that far)

When I restarted payments in 2008 they allowed me to restart my original payments (£71.45 pm), and the extra payments (£56.75 pm) they referred to as a Personal Pension Plan increment (S620) thats the wording of a letter I have from them which they added a serial no to the original policy, which makes it a addition to the first policy ?- or a new policy ?-not sure which.They also say the two payments will amalgmate into one.

SA ended the call by saying they would open up a complaint and investigate the circumstances!

HMRC were close to useless I have found out more by googling and from your forum. I think when I am a bit clearer I will write to them with all the details and facts depending on what SA come back with in their investigation. I see online that various tell me I can claim back 3,4 or even 6 years any case or regulations that could steer me to towards that?

Dazed_and_C0nfused

Who are SA?

And have you paid any tax after 5 April 2016?  If so was it on pension income or earnings (wages/business profits)?

pnmpeter

Hi SA stands for standard life, and yes I have paid income tax as a PAYE up to End of March 2019 when I retired from my last employer and now receive state pension.

Dazed_and_C0nfused

Well you won't be able to claim anything back for the the current or previous tax year then as tax relief on retirement annuity contracts works a bit like the Personal Allowance, not "relief at source" pension contributions. 

You may well be able to claim for 2016:17, 2017:18 and 2018:19 but the amount of tax relief due will depend on your overall tax position.

I would think a letter to HMRC with supporting documentation is likely to be the best starting point.  

You have to have claimed for 2016:17 by 5 April 2021.

You have missed the boat for any earlier tax years.

pnmpeter

IHT or CGT

I have a question concerning Inheritance Tax (IHT) and Capital Gains Tax (CGT)

Myself and my 4 sibling’s inherited the family house when our parents died 4 years ago and paid the IHT as required (shared between us) which allowed the house to be used and kept within the family whilst one of us lived another two years (One sibling died of Cancer after 2 years).

Now 4 years later the house value has increased due to the new circumstances and about to be sold hopefully before the stamp duty holiday ending March 2021.

The house was independently valued at that time and the increase is in the region of 250K –if the eventual delays due to Covid 19 don’t hold it up anymore.(4 sales fell through in the last year due to lockdown issues).

So the house sale is in the name of the sibling executors, so a couple of questions?

The executors -2 siblings (out of 4) not a solicitor –so have a duty to distribute the estate as per the terms of the will. (The property was legally transferred to the executors to allow the sale to proceed)

If CGT is due by the recipients would they be responsible for paying the CGT as each one the sibling’s has differing TAX situations, If not how could the executors calculate the individual tax due for each? (I.e. 18% or 28% of the capital gain)And then distribute the balance of proceeds?

None of us siblings actually live in the property- although we have a record of the costs and allowances which have occurred since inherited.

Also if IHT was paid to settle our parent’s estate then would even CGT be due as would this not be double taxation?

Any thoughts would be much appreciated to assist as we understand that CGT would be due within 30 days under current HMRC 2021 rules, and would that be from the sale or when the recipients receive the estate?

Linton

pnmpeter said:

IHT or CGT

I have a question concerning Inheritance Tax (IHT) and Capital Gains Tax (CGT)

Myself and my 4 sibling’s inherited the family house when our parents died 4 years ago and paid the IHT as required (shared between us) which allowed the house to be used and kept within the family whilst one of us lived another two years (One sibling died of Cancer after 2 years).

Now 4 years later the house value has increased due to the new circumstances and about to be sold hopefully before the stamp duty holiday ending March 2021.

The house was independently valued at that time and the increase is in the region of 250K –if the eventual delays due to Covid 19 don’t hold it up anymore.(4 sales fell through in the last year due to lockdown issues).

So the house sale is in the name of the sibling executors, so a couple of questions?

The executors -2 siblings (out of 4) not a solicitor –so have a duty to distribute the estate as per the terms of the will. (The property was legally transferred to the executors to allow the sale to proceed)

If CGT is due by the recipients would they be responsible for paying the CGT as each one the sibling’s has differing TAX situations, If not how could the executors calculate the individual tax due for each? (I.e. 18% or 28% of the capital gain)And then distribute the balance of proceeds?

None of us siblings actually live in the property- although we have a record of the costs and allowances which have occurred since inherited.

Also if IHT was paid to settle our parent’s estate then would even CGT be due as would this not be double taxation?

Any thoughts would be much appreciated to assist as we understand that CGT would be due within 30 days under current HMRC 2021 rules, and would that be from the sale or when the recipients receive the estate?

I suggest you repost this as a new thread in the Deaths, Funerals and Probates Forum.  Your question has nothing to do with pensions nor the topic under which you posted.

pnmpeter

thanks I new to posting so will do that