Provided incorrect information - help, any ideas

Dazed_and_C0nfused

But given the op's prognosis I would say making sure someone they trust to act in their best interests is made aware of this thread is sensible.

And then they should spend their remaining time on something that will give them and their family and friends some memories a little more exciting than tax that is or isn't due on a pension.

Culzean

Dazed_and_C0nfused said:

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.

They told me (in writing now) that they had 'calculated it to be £59,286.45 (or similar). That's some calculation as its precisely 20%. Clearly nothing like that and my quick sums suggest its well over £100,000.

Culzean

Sarahspangles said:

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.

I have to deal with it. I simply can't leave this for my wife. There really is nobody else unless I employ a professional. I suspect ill have to do whatever I can to get it back but it won't be easy and it won't be all.

Culzean

Marcon said:

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. 

Thank you for that. At this stage i'm a bit frightened of going all in on the journo as I am hoping to negotiate something more satisfactory with the SIPP provider. Probably along the lines of they pay the tax on any shortfall that I can't repay and/compensate me for any loss and other impact on my life.

If they play hardball with me then i'm at a crossroads. My inclination is to go Ombudsman rather than the bare knuckle journo approach. I know I can't avoid the tax so have to try and pay back but I might need 'help' and that's where perhaps the journalist or Ombudsman might be needed. I'm just not sure which or if both are possible (what would Ombudsman think if I went on front foot)

Culzean

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.

Thank you and this is the approach I am taking. I will do it myself as I think I can work quicker but if not I will find someone to take over

One of the biggest obstacles I fear is the willingness of the providers of the fixed term accounts where I (my wife) invested the lions share of the money. Would they refuse to repay me? I will get a letter from the SIPP provider detailing their error and hopefully that will suffice. But I have a horrible feeling this is going to be anything but plain sailing 

Culzean

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).

Once I cleared my head I concluded that the SIPP provider will likely have a maximum they are prepared to pay/compensate voluntarily. If I don't accept it then they just report it as income to HMRC and that's them done until I either Ombudsman them (which I would) or sue them for loss (which I wouldn't). 

As suggested by a couple of others I don't believe there's any point me going to HMRC. It appears their rules are clear and my angst is with the SIPP provider

Culzean

[Deleted User] said:

This is a horrible situation to be in.  I have huge sympathy and hope that it can be sorted.  But I want to explain why it is worse than £60,000 and that it might be in your best interests to get as much as possible repaid. You and your family definitely should not be in this position though.

Dazed_and_C0nfused said:

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.

£60,000 is basic rate only tax.  But as Dazed says, the real tax liability (PAYE plus self-assessment) will be over £100,000 (and it could be £125,000 or more if you have state pension and other income).

Some people might say that it is the SIPP provider that is reponsible for paying the PAYE to HMRC and they can go and whistle for it.  While that is right, the SIPP provider would have a common law right to reclaim any PAYE from you / your estate (there is a tax case called McCarthy vs McCarthy Stone on this).  So that says you would still have to pay £100,000+ of tax.  It's not a good answer.  I can't see a SIPP provider writing off the PAYE, let alone the rest of the tax.

My experience of normal situations is that HMRC are unlikely to let you (or your estate) off any tax due. They have a duty to collect this tax.  But I don't have experience of your specific fact pattern though.  Even if HMRC did, it will be a long process getting them to agree,

I doubt that the SIPP provider will make you whole for the tax you paid.  This will be a huge expense for them (more than PAYE, especially if it should be grossed up to deal with the tax on tax).  If you are lucky (with the pressure, publicity, etc) it might happen.  But I suspect it is unlikely.

So I end up saying it's in your interest (and the beneficiaries of your estate) to repay as much of the money as you can so that bit can be unravelled. This would be horrible for you and a lot of hassle (e.g. borrowing from the kids, dealing with the bureaucracy in trying to get the fixed term deposits back - which may just not happen, trying to borrow from a bank - the interest cost is way cheaper than the tax).  I'd love to be able to say fight it, but I suspect at the end of the day that would be a difficult process.

If there is still a shortfall (and you get enough publicity / pressure) you might be able to persuade the SIPP provider to lend any shortfall to your wife (with her giving the money to you) and that being used by you to repay the shortfall.  This would all be cash-less.  This can then be repaid back by your wife with the tax-free proceeds when she inherits your pension after your death.  The SIPP provider will hate this.  However, if you can get enough publicity / pressure on them it might work.

I can't think of anything practical otherwise from a tax perspective.  Sorry.

Unfortunately I agree with your summary entirely. I think I am going to pin my hopes on The Ombudsman to see me looked after fairly. I am going to have to work damned hard to get the money back from the fixed term accounts we have and then add to that from other savings we have (ISA's so we lose the tax shield of those).

We can probably get it all back (or perhaps come up a few thousand short) assuming the fixed term account providers cooperate, then in a few months my wife will get it all back again tax free, but in the interim we would have suffered a fairly reasonable financial loss and considerably more pain of work and the associated stress

Culzean

xylophone said:

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.

Thank you. It wasn't advice it was their misunderstanding of the tax treatment. As you see from my opening posts, nothing at all ambiguous in their instruction.

The insurance point is interesting. I'm not going to pay the tax and will get all, or most of the money back but it will cost me in time, further health for sure and loss of interest. So I am definitely pursuing them for all of that

Culzean

Voyager2002 said:

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.

Yes, those are exactly my thoughts now I've had chance to dwell on it and read through the advice on this thread. 

xylophone

Thank you. It wasn't advice it was their misunderstanding of the tax treatment. As you see from my opening posts, nothing at all ambiguous in their instruction.

Wasn't it? 

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."

I am assuming that the telephone call was recorded?

You were unsure.  You asked for clarification of the position not unreasonably expecting your provider to know the answer.

The person to whom you spoke checked  with "higher authority" (presumably the person authorised by the firm to answer such queries correctly)  and provided you with misleading information which can be construed as advice.

I notice that poster "Voyager" says

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.

It seems to me  that the provider  went beyond their authority and (although not deliberately)  they made a mistake which has 

caused you immense distress and worry at a time when you are very vulnerable.

Their professional indemnity insurance exists to cover professional mistakes.

I find it very concerning that the provider is simply telling you to deal with the consequences of an error for which the firm is 

responsible.

Your last months with your family should not be overshadowed by this debacle.   I wonder whether it would be worth drawing 

Steve Webb's attention to the matter?

https://uk.linkedin.com/in/steve-webb-1714b54

https://www.thisismoney.co.uk/profile-1383/steve-webb.html