Provided incorrect information - help, any ideas

Culzean

It's difficult to know where to start, I am in shock. I am petrified of telling my wife for fear of any impact on her health and well being

I have just turned 70 and am terminally ill and expected to live for another 2-4 months I think.

I know (and knew) that my wife would be able to take my SIPP tax free upon my death. 

But I was told (informally) that I might be able to take my SIPP tax free before I died if I was certified as having less than 1 year to live. I Googled it and it appeared to be the case. 

So I phoned my SIPP provider and initially they told me that they didn't believe I could take the money tax free as I had already drawn some of it. The person I was speaking to on the phone didn't sound too sure of himself and therefore I asked if he could check and put it in writing. Some days later I received an email which said 

"I have been asked to contact you regarding a potential serious ill health payment. 

This is to confirm that if you receive a serious ill health payment, this will be paid tax free, regardless of whether funds are crystallised or uncrystallised. 

In order to take a serious ill health payment we will require the attached form to be completed by yourself and a medical practitioner. Once returned we will send this to our technical team to sign off on the payment."

Naturally I was "delighted". My wife is not particularly well versed financially so it gave me the opportunity to reinvest some of the money, gift some to my children and also for my wife and I to enjoy some little luxuries together whilst I was still able.

I requested the funds and my SIPP was paid to me in full a little over 2 months ago.

This afternoon I received a call from my SIPP provider telling me that they had made an error and that I had two options. 

1. Return the payment (c£300,000) and they will 'unravel' the transaction'

2. Pay HMRC c£60,000 which is the tax that should have been witheld.

They obviously apologised profusely but didn't seem concerned that I am not in a position to repay the £300,000. Much has been reinvested in fixed rate bonds which I assume I could get that back if I explained the situation, but I have also gifted children and other close family members as well as treating my wife and I to some much needed treats.

I'm simply not in a position to repay the £300,000. 

Nor though do I see any justification for paying HMRC £60,000. I wouldn't have gone anywhere near my SIPP (which I've not accessed one penny of for nearly 2 years). I only withdrew the money because I was advised I could do tax free and if I had known that advice was incorrect I would simply have left it untouched and my wife would have received the £300,000 tax free.

I now don't know what to do. I suspect my SIPP provider will just say 'Sorry' (they have now sent a letter confirming their call and offered me £500 as a goodwill gesture) and pass the case to HMRC who I suspect will say it's not their problem. The rules are clear and I need to take up the matter with the SIPP provider. That being the case I will be forced to pay £60,000 of tax that I simply didn't need to pay and wouldn't have done had I been given the correct information in the first place.

I just don't know what to do, I'm battling hard against all my end of life issues and this has been dropped on me like a bombshell and at a time when I simply can't deal with it     

Dazed_and_C0nfused

I don't know for certain where they have got the £60k figure from but the real tax liability is more likely to be well in excess of £100k.

Hopefully someone will be able to provide more info about the potential for this to be treated as non taxable.  If there is any scope for this.

Brie

Well you should complain.  Assuming you have the energy.  And I doubt that even if successful you won't regain the £60k to pay off HMRC but you might get a portion.

Given your circumstances I would hit them hard stating that this is a COMPLAINT and that their error has caused you SEVERE FINANCIAL DETRIMENT.   Tell them also that they have 7 days to resolve the problem to your satisfaction before taking it to the press.  Now the press will love a David and Goliath story and are most likely willing to do all the hard work for you.  

Sorry for your situation, sorry for this massive mess you've been landed with.

Sarahspangles

I just don't know what to do, I'm battling hard against all my end of life issues and this has been dropped on me like a bombshell and at a time when I simply can't deal with it.

Does this have to be made an immediate priority? Could it wait and be handled by whoever has been nominated to deal with your estate? So long as that isn’t your wife or immediate family. The financial outcome won’t change but moving some funds around and paying tax isn’t important right now.

Dazed_and_C0nfused

HMRC have some guidance here which differentiates between crystallised and uncrystallised funds.

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm063400

Marcon

Culzean said:

It's difficult to know where to start, I am in shock. I am petrified of telling my wife for fear of any impact on her health and well being

I have just turned 70 and am terminally ill and expected to live for another 2-4 months I think.

I know (and knew) that my wife would be able to take my SIPP tax free upon my death. 

But I was told (informally) that I might be able to take my SIPP tax free before I died if I was certified as having less than 1 year to live. I Googled it and it appeared to be the case. 

So I phoned my SIPP provider and initially they told me that they didn't believe I could take the money tax free as I had already drawn some of it. The person I was speaking to on the phone didn't sound too sure of himself and therefore I asked if he could check and put it in writing. Some days later I received an email which said 

"I have been asked to contact you regarding a potential serious ill health payment. 

This is to confirm that if you receive a serious ill health payment, this will be paid tax free, regardless of whether funds are crystallised or uncrystallised. 

In order to take a serious ill health payment we will require the attached form to be completed by yourself and a medical practitioner. Once returned we will send this to our technical team to sign off on the payment."

Naturally I was "delighted". My wife is not particularly well versed financially so it gave me the opportunity to reinvest some of the money, gift some to my children and also for my wife and I to enjoy some little luxuries together whilst I was still able.

I requested the funds and my SIPP was paid to me in full a little over 2 months ago.

This afternoon I received a call from my SIPP provider telling me that they had made an error and that I had two options. 

1. Return the payment (c£300,000) and they will 'unravel' the transaction'

2. Pay HMRC c£60,000 which is the tax that should have been witheld.

They obviously apologised profusely but didn't seem concerned that I am not in a position to repay the £300,000. Much has been reinvested in fixed rate bonds which I assume I could get that back if I explained the situation, but I have also gifted children and other close family members as well as treating my wife and I to some much needed treats.

I'm simply not in a position to repay the £300,000. 

Nor though do I see any justification for paying HMRC £60,000. I wouldn't have gone anywhere near my SIPP (which I've not accessed one penny of for nearly 2 years). I only withdrew the money because I was advised I could do tax free and if I had known that advice was incorrect I would simply have left it untouched and my wife would have received the £300,000 tax free.

I now don't know what to do. I suspect my SIPP provider will just say 'Sorry' (they have now sent a letter confirming their call and offered me £500 as a goodwill gesture) and pass the case to HMRC who I suspect will say it's not their problem. The rules are clear and I need to take up the matter with the SIPP provider. That being the case I will be forced to pay £60,000 of tax that I simply didn't need to pay and wouldn't have done had I been given the correct information in the first place.

I just don't know what to do, I'm battling hard against all my end of life issues and this has been dropped on me like a bombshell and at a time when I simply can't deal with it     

I read your post with an increasing sense of absolute horror and fury on your behalf and that of your wife. As if you didn't have enough problems... 

Of course you can't deal with this nonsense - but there's a man who can and I'm pretty sure will: Tony Hetherington. Email him a copy of exactly what you've posted here: Tony.hetherington@mailonSunday.co.uk

He's intervened before with success, albeit in a different context: https://www.msn.com/en-gb/money/other/tony-hetherington-pension-firm-demand-95-000-back-for-error-that-was-all-their-fault/ar-BB1ql4PJ

Your situation is far worse, given your health. Forget the idea of making a complaint yourself; head straight for him.

I wish you 100% success. 

Voyager2002

You should complain, making it clear to them that you expect them to meet the financial consequences of their mistake. And you should also make your best efforts to return the funds, enabling them to "unwind" the transaction.

So: the money that you have given away cannot be returned. They (your SIPP provider) should be liable for the cost of the tax due on this amount.

The bonds in which you have invested the bulk of the money can presumably be sold so that the invested money can be returned. Again, they are liable for any fees you have to pay, and any difference between the prices at which you bought the bonds and those at which you now have to sell.

If the process of undoing the investments and returning the money seems likely to take more time than you are willing to spend on this, pay someone to do it for you and again that is a cost that should be met by your SIPP provider.

Marcon

Voyager2002 said:

You should complain, making it clear to them that you expect them to meet the financial consequences of their mistake. And you should also make your best efforts to return the funds, enabling them to "unwind" the transaction.

So: the money that you have given away cannot be returned. They (your SIPP provider) should be liable for the cost of the tax due on this amount.

The bonds in which you have invested the bulk of the money can presumably be sold so that the invested money can be returned. Again, they are liable for any fees you have to pay, and any difference between the prices at which you bought the bonds and those at which you now have to sell.

If the process of undoing the investments and returning the money seems likely to take more time than you are willing to spend on this, pay someone to do it for you and again that is a cost that should be met by your SIPP provider.

If you only had a matter of weeks to live, you would you want to be faffing around like this instead of spending what little time you had left with your loved ones? This is a real person, not a case study.

None of this is likely to be needed. If there was ever a strong 'change of position' case, this is it. The SIPP provider gave wrong advice - in writing - and they should be paying any tax (which, as OP points out, was entirely avoidable had his wife inherited on his death).

gmje

Having lost my husband to the big C we had a sudden shocking diagnosis and it puts your head in a place nobody wants to be......Firstly I would say make the most of every minute with your family the time is precious for as long as your illness will allow. Secondly the issue these heartless bafoons have dumped at your door are numpties dont give them your precious energy. In your current circumstances I can understand your stress,day to day living takes priority,personally I would like you to ignore them if possible because as said earlier tax will get sorted in your estate later down the line, but if its not in your nature the next best option is for someone else to sort it for you like Tony Hetherington.......
quick google.....
If youre under 75 it looks as if you can have it tax free but inheritance tax comes into play after you pass.

https://techzone.abrdn.com/public/pensions/Guide-Pensions-and-Ill-health#anchor_2

my best wishes for you and your wfie

xylophone

It seems to me that you can make a formal complaint.

The letter from your provider is quite clear.

If this is seen as ADVICE, then surely the provider is in a weak position as presumably not qualified to give you financial advice?

If it is stating the law/ regulations as understood and practised by the provider, then the position is equally weak because  it indicates

that whoever at the provider gave you this information and authorised the transfer of the cash was incompetent/ill trained?

COMPLAIN or have a representative complain on your behalf.

Your provider can ruddy well make a claim on its professional indemnity insurance.

Voyager2002

Marcon said:

Voyager2002 said:

You should complain, making it clear to them that you expect them to meet the financial consequences of their mistake. And you should also make your best efforts to return the funds, enabling them to "unwind" the transaction.

So: the money that you have given away cannot be returned. They (your SIPP provider) should be liable for the cost of the tax due on this amount.

The bonds in which you have invested the bulk of the money can presumably be sold so that the invested money can be returned. Again, they are liable for any fees you have to pay, and any difference between the prices at which you bought the bonds and those at which you now have to sell.

If the process of undoing the investments and returning the money seems likely to take more time than you are willing to spend on this, pay someone to do it for you and again that is a cost that should be met by your SIPP provider.

If you only had a matter of weeks to live, you would you want to be faffing around like this instead of spending what little time you had left with your loved ones? This is a real person, not a case study.

None of this is likely to be needed. If there was ever a strong 'change of position' case, this is it. The SIPP provider gave wrong advice - in writing - and they should be paying any tax (which, as OP points out, was entirely avoidable had his wife inherited on his death).

I agree completely... however, the OP is obviously worried about the tax and has posted about this situation. He is likely to feel better about it if he spends a little time making a complaint and starting the process of returning what funds he can so that the deal can be "unwound", at least partially. I agree with your second paragraph, but that is only going to happen if the OP makes a complaint and also makes whatever efforts are reasonable under the circumstances to reverse the mis-advised transaction.