PCLS and Cancellation Rights

valiant24

The FCA has aligned itself with HMRC's view that cancellation rights do not apply to a Pension Commencement Lump Sum.   Thus anyone who plans to take the lump sum in anticipation of its reduction or removal in the next budget then return it under a 30-day cooling off period are forewarned that they can't.

https://www.fca.org.uk/news/statements/tax-free-pension-lump-sums-cancellation-rights

I haven't though read any analysis of what will happen to those of us who did same LAST year.   My accountant says though that likely:
1. I will have lost the tax free sum forever - and I had 2012 protection :-(
2. I will also have to be pay a  penalty of 45% of the returned contribution value minus the Annual Allowance

Total "loss" for me could be around £300k.  Bah!

I believe that there are thousands, perhaps tens of thousands, of people in the same position.  Should they all successfully be able to claim that they were mis-advised by their platform, could it bankrupt some platforms?

Dazed_and_C0nfused

valiant24 said:

The FCA has aligned itself with HMRC's view that cancellation rights do not apply to a Pension Commencement Lump Sum.   Thus anyone who plans to take the lump sum in anticipation of its reduction or removal in the next budget then return it under a 30-day cooling off period are forewarned that they can't.

https://www.fca.org.uk/news/statements/tax-free-pension-lump-sums-cancellation-rights

I haven't though read any analysis of what will happen to those of us who did same LAST year.   My accountant says though that likely:
1. I will have lost the tax free sum forever - and I had 2012 protection :-(
2. I will also have to be pay a  penalty of 45% of the returned contribution value minus the Annual Allowance

Total "loss" for me could be around £300k.  Bah!

I believe that there are thousands, perhaps tens of thousands, of people in the same position.  Should they all successfully be able to claim that they were mis-advised by their platform, could it bankrupt some platforms?

What advice did you receive from your platform 🤔

valiant24

That I was free to return the PCLS under a 30-day cooling-off provision.

Dazed_and_C0nfused

valiant24 said:

That I was free to return the PCLS under a 30-day cooling-off provision.

And on what day did you return it?

valiant24

Withdrew £410,000 25/1024, returned 14/11/24.

DRS1

I wonder if there is an argument that because they have issued this statement now what you did last year was OK because if it obviously wasn't OK under the old guidance then they would not have had to issue this statement now.

Don't get your hopes up but it may be worth a go.

MeteredOut

valiant24 said:

That I was free to return the PCLS under a 30-day cooling-off provision.

Can you share the exact wording they provided to you?

If this was over the phone, I suspect they will no longer have the recording...

valiant24

"I have checked internally on this you your specific account and have had confirmation that although you have take UFPLS, you would still get cancellation rights for 30 days for the PCLS payment which you are asking for".

MeteredOut

valiant24 said:

"I have checked internally on this you your specific account and have had confirmation that although you have take UFPLS, you would still get cancellation rights for 30 days for the PCLS payment which you are asking for".

Strictly speaking, you did have cancellation rights in the generic sense (ie, the platform allowed you to undo what you previously did), and used those rights. Its interesting that the statement makes no comment on the tax implications of using those rights.

For the sums of money you're talking about, I'd certainly be having a conversation with the platform about that statement, but I'd not be optimistic. Check if there's any "nothing in this is advice and you should contact a tax advisor for professional advice" get-out clause

EDIT: Note also, from your link above (my bolding):

"Unless limited to the activities expressly specified in our rules, the firm will be treated as voluntarily adding cancellation rights in relation to other rights arising under that contract, including those relating to PCLS. Our rules do not prevent a pension provider from choosing to offer cancellation rights in their contracts in additional circumstances beyond those set out in our rules. Firms will need to consider the implications of tax legislation when voluntarily offering cancellation rights."

So, its not that HRMC and FCA are saying that cancellation rights are not allowed, but that undoing the PCLS does not undo the tax implications of taking the PCLS. I suspect that will be the platforms get-out clause.

valiant24

My point is, there are thousands in the same position.

Say ii, for example, has 1,000 people in this position, each with potential losses of, say £200,000 each.

That's a potential liability of £200m.   That would presumably bring the platform down.  I think this could be a huge issue.

MeteredOut

valiant24 said:

My point is, there are thousands in the same position.

Say ii, for example, has 1,000 people in this position, each with potential losses of, say £200,000 each.

That's a potential liability of £200m.   That would presumably bring the platform down.  I think this could be a huge issue.

I suspect the issue will be much smaller than you think. Without trying to sound too harsh, those with fund values of £500K+ are more likely to be finance savvy and not make rash decisions based on tabloid headlines.

And of those that did withdraw, how many do have it in writing that there would be no tax implications.