Protected tax free cash

Steve182

xylophone said:

You have the links to the Techzone fact sheet and to HMRC Manual.

Here is the Pru/M&G version.

https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/primary-protection-tax-free

This caught my eye

Before covering protection of lump sum rights, it’s important to understand the valuation of lump sum rights at A-day.

When people notified HMRC of their intention to rely on primary or enhanced protection, it was also possible to protect lump sum rights that were more than £375,000 on 5 April 2006.

However, there is no reference to a certificate.

There is though this

https://www.curtisbanks.co.uk/case-study/enhanced-protection-fact-sheet/

If, on 5 April 2006, you were entitled to more than £375,000 tax free cash, you could protect this as part of your enhanced protection. The protection certificate would give a protected PCLS percentage based on the values as at 5 April 2006. For example, if your pension had been worth £2m and your tax free cash entitlement was £400,000, your certificate would show protected PCLS of 20%. You would be able to take 20% PCLS every time you took benefits, with no upper limit.


This leads me to wonder if the "certificate" applied to TFC greater than £375,000?

I guess I may just have to humor them and contact HMRC, who I guess will probably say that they don't provide such certificates and that the new scheme needs to obtain the relevant info from the old scheme.

You could write and put your query.

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/pension-scheme-enquiries

Thanks Xylophone

That's most helpful, I will write to them and include the numbers provided by the original scheme provider, which were significantly less than 375K on 6 April 2006

xylophone

I will write to them and include the numbers provided by the original scheme provider, which were significantly less than 375K on 6 April 2006

Let us know how you get on.

dunstonh

Following on from the earlier correspondence with my SIPP provider  -

"In regards to the below email [requesting a current valuation of TFC], we would require a protection certificate from HMRC, before we are able to apply this to our system due to us needing the correct numbers form the certificate."

So I asked them to obtain this from HMRC, and below is their latest reply -

"Thank you for your email.

Unfortunately its not something we can do, we cannot speak to HMRC directly in regards to specific client so you would have to do this and send it over to us."

You dont get a certificate with protected tax free cash.   You do with fixed protection.  I wonder if they have got it into their head that you have fixed protection?

xylophone

Re "Fixed Protection".

https://techzone.abrdn.com/public/pensions/Technical-guide-fixed-protection

Steve182

I've written the letter to HMRC requesting the certificate. There is little doubt in my mind that they will simply tell me that no such certificates are issued for TFC and it's up to the scheme administrators to communicate such details. If I'm correct I think it's pretty poor that one of the largest pension schemes in the country are so clueless in this respect.

I'll update as soon as HMRC reply.

Thank-you all for your input.

xylophone

I'll update as soon as HMRC reply.

Thanks for this.

Might be a long wait!

It would be interesting to know the outcome - a useful point of reference for forum members.

Steve182

HappyHarry said:

There are rumours that the Lifetime Allowance might be increased in the budget on Wednesday. 

The Lifetime Allowance forms part of the enhanced Tax Free Cash calculation.

If the Lifetime Allowance does increase, then your TFC, currently £137,040 could fall. 

For every £100,000 increase in the Lifetime Allowance, your TFC would fall by around £1,100.

Now that the LTA will be completely abolished I wonder how my enhanced TFC will be affected. I guess they will publish a new formula?

dunstonh

Steve182 said:

HappyHarry said:

There are rumours that the Lifetime Allowance might be increased in the budget on Wednesday. 

The Lifetime Allowance forms part of the enhanced Tax Free Cash calculation.

If the Lifetime Allowance does increase, then your TFC, currently £137,040 could fall. 

For every £100,000 increase in the Lifetime Allowance, your TFC would fall by around £1,100.

Now that the LTA will be completely abolished I wonder how my enhanced TFC will be affected. I guess they will publish a new formula?

They may not have to tweak it much as the tax free cash limit is remaining frozen at 25% of the current LTA,
The likely outcome is that the calculation will have a minor adjustment to reflect that figure rather than the LTA itself.

Steve182

Steve182 said:

I've written the letter to HMRC requesting the certificate. There is little doubt in my mind that they will simply tell me that no such certificates are issued for TFC and it's up to the scheme administrators to communicate such details. If I'm correct I think it's pretty poor that one of the largest pension schemes in the country are so clueless in this respect.

I'll update as soon as HMRC reply.

Thank-you all for your input.

HMRC finally replied last week to tell me that I cannot have a pension protection certificate because I don't hold additional LTA protection.

That much I already knew. Unfortunately the reply was very brief and they didn't offer any further clarification that I could forward on to my current pension provider. 

Anyway I've emailed my current pension provider today to tell them that HMRC cannot issue a certificate for this and I've suggested that they may be confusing "scheme specific lump-sum protection" with "LTA protection"

I also included a quote from PTM063130 to help them:

"As the name suggests, this form of lump sum protection applies to a specific pension scheme. There is no need for an individual or pension scheme administrator to claim this protection from HMRC. The legislation applies the protection automatically."

Hopefully this will be now be dealt with by someone with a better understanding of pension rules and procedures and my lump sum protection will be applied without further delay.

I'll update in due course.

Steve182

I eventually raised a formal complaint to AJ Bell. Response below -

Dear Mr Steve182

 Thank you for your email.

 I can confirm that we have logged this as a complaint on our side.

 Firstly, I apologise you were given incorrect information regarding your protection. I think the administrator who dealt with the query was confused regarding the type of protection you had as we do need a certificate for things like fixed protection however your protection is different, and no certificate is needed, so again I do apologise for the confusion.

 I can confirm that following your previous correspondence with your team, your protection details have been correctly added to your system.

 With this now showing correctly do you need any information on your SIPP or anything further provided ?

 Kind regards