PCLS and Cancellation Rights

valiant24

MeteredOut said:

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.

Fair comment.  But I think it has been quoted repeatedly in the media - whether true or not - that there are many thousands affected.

It seems unlikely that anyone financially savvy would simply have returned the funds without some kind of assurance that this was permissible.  Mine is a personal message from one of the managers at my platform, which I pressed for because I am atypically risk-adverse, and pesky and persistent, but most will I believe be relying upon generic advice from their platform. 

dunstonh

It seems unlikely that anyone financially savvy would simply have returned the funds without some kind of assurance that this was permissible.

Mine is a personal message from one of the managers at my platform, which I pressed for because I am atypically risk-adverse, and pesky and persistent, but most will I believe be relying upon generic advice from their platform. 

What disclaimer does the platform operate?   Typically there will be some disclaimer to cover non-advised information.  Either in the footer of a message, a warning in the phone call or in their T&C.

for example, ii say:
As a general comment, what a Member does (if anything) will be dictated by his or her circumstances and will be affected by the advice he or she takes.  We strongly suggest that Members take appropriate independent advice from a suitably qualified third party before making important decisions in relation to his or her SIPP.  This suggestion is made because ii is not authorised to advise SIPP Members and, as such, will not be able to give Members tax, legal, investment or other financial advice.

valiant24

dunstonh said:

It seems unlikely that anyone financially savvy would simply have returned the funds without some kind of assurance that this was permissible.

Mine is a personal message from one of the managers at my platform, which I pressed for because I am atypically risk-adverse, and pesky and persistent, but most will I believe be relying upon generic advice from their platform. 

What disclaimer does the platform operate?   Typically there will be some disclaimer to cover non-advised information.  Either in the footer of a message, a warning in the phone call or in their T&C.

for example, ii say:

As a general comment, what a Member does (if anything) will be dictated by his or her circumstances and will be affected by the advice he or she takes.  We strongly suggest that Members take appropriate independent advice from a suitably qualified third party before making important decisions in relation to his or her SIPP.  This suggestion is made because ii is not authorised to advise SIPP Members and, as such, will not be able to give Members tax, legal, investment or other financial advice.

We're well into the weeds of speculation here, and I certainly know no more, and probably less, than you do.

However there would be a world of difference between ii offering advice to an investor on whether the withdrawal, and potential repayment, of PCLS would be an appropriate course of action for a particular investor; and answering correctly "Do I have a 30-day cooling-off period for this transaction?"

I can't see that advice that a transaction has a cooling-off period when it doesn't could be covered by a disclaimer.   It doesn't constiture tax, legal, investment or other financial advice.

Dead_keen

As you well know, you are in a scary position.  If it were me I would be having sleepless nights. 

This is not the kind of area that a normal accountant would be competent to deal with.  Your particular one might be.  But the technical issues, the quantum and need for practical experience of discussing this with the right people at HMRC will be very important in trying to resolve this.  Talk to your accountant about who might be if it is not them.

If only one person (you) has this issue it may be possible to resolve this in a pragmatic way.  But there will be others and they (or more likely their advisers) will already have discussed this with HMRC.  That means HMRC will have considered this in a lot of detail and have come to a firm view of the tax treatment.  HMRC would not have published their view in the December 2024 newsletter just on a whim as to what they feel might be the right tax treatment.  It has then been carefully reconsidered by HMRC (with input from the FCA) and published again in the September 2025 newsletter. Definitely a very considered view.

To me, this means that a sob-story and a quick deal with HMRC is not going to happen unless you can show you have some special facts relating to you (and you might, see further below). 

So that means litigation. And to do that you need to have technical reasons why the tax charge should not be there.  This is again not something that a common-or-garden accountant will have the skills in.  Saying it is "unfair" won't cut it.  There is a guy called Julian Martin who had to give some of his pay back.  His advisers found ways in which the legislation was worded meant he could have negative earnings and get some tax back.  You need that kind of thing in the legislation. Julian Martin though had a painful journey through the courts.

If it is just you taking this to the FTT, taking professional advice and presenting your case as best you can, this will cost you a good half or more of whatever you think you have lost.  So if you go this way, you need to team together with other people in a similar situation.  Talking to tax specialist in the pensions / dispute resolution area will be key for this.  There are other routes though, such as getting the newspapers interested enough to run a story about you and finding other people that way.

You also need to take tax advice on what to put on your 2024/25 tax return.  Based on what HMRC says, you have a tax liability and, if that is right, you have to report it on your self-assessment return.  What you report and what white space disclosure you make will be "interesting".  If you don't take personal advice then HMRC may well feel that you have been careless and want to charge significant penalties.  If you take advice and ignore it then you will be in the deliberate level of penalties or worse.

In terms of taking tax advice at the time you took the lump sum, you have not shown you have taken any on this thread.  Your comment:

"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".

does not mention tax in the slightest.  Whether or not you have cancellation rights is, as you now know, not the same as "I have looked at this for you and can confirm that if you exercise your cancellation rights then the payments to you and the repayment back to us will be treated in the same way as you never took the PCLS in the first place". But I guess you are fed up hearing that.

I don't know whether you have explored (with a legal adviser who specialises in this area) whether you actually had cancellation rights and, if so, whether you exercised them properly (e.g. did you have to put a hand written letter in the snail mail signed in triplicate on a Tuesday to cancel whereas you just did it all by phone).  If you did not, what are the consequences of that?  Is the administrator now holding the (wrongly) returned PCLS on your behalf, could they never have invested it in the SIPP as a contribution for you and so could now return it tax free since it is still your original PCLS?  No idea.  But this is the kind of argument that someone used to settling disputes with HMRC might be able to use to get you out of an "unfair" tax charge.

I don't know who you used for your pension but I randomly searched through Hargreaves Lansdown's terms and conditions and they say (my emphasis):

HLAM will not provide you with any personalised advice (including investment advice) or recommendations under these Terms, nor is anything on the HL Website or communications from us in respect of your Account to be construed as personalised financial, investment or tax advice.

Because of the quantum, it is definitely worth talking to a lawyer with the skills needed to look at this properly.  I don't know much about the legal side of getting compesation.  However, the cases I have read about getting compensation for negligent (or not) tax advice - where the adviser was engaged to provide tax advice - look very complex and expensive, some going to the Court of Appeal.  I doubt that a pension administrators and their insurers will  want to settle and so will want to go to court.  How much this would cost is something I have no clue about.  But if you were to lose then you will have to pay the administrator's legal costs too.   

If it was me, I would want to understand the terms and conditions, get a recording of any phone calls, and so on.  Then find a decent lawyer and a decent tax adviser who both understand this area.  And I'd try to find other people in a similar situation to share the knowledge/risk/costs. 

valiant24

Dead_keen said:

As you well know, you are in a scary position.  If it were me I would be having sleepless nights. 

This is not the kind of area that a normal accountant would be competent to deal with.  Your particular one might be.  But the technical issues, the quantum and need for practical experience of discussing this with the right people at HMRC will be very important in trying to resolve this.  Talk to your accountant about who might be if it is not them.

If only one person (you) has this issue it may be possible to resolve this in a pragmatic way.  But there will be others and they (or more likely their advisers) will already have discussed this with HMRC.  That means HMRC will have considered this in a lot of detail and have come to a firm view of the tax treatment.  HMRC would not have published their view in the December 2024 newsletter just on a whim as to what they feel might be the right tax treatment.  It has then been carefully reconsidered by HMRC (with input from the FCA) and published again in the September 2025 newsletter. Definitely a very considered view.

To me, this means that a sob-story and a quick deal with HMRC is not going to happen unless you can show you have some special facts relating to you (and you might, see further below). 

So that means litigation. And to do that you need to have technical reasons why the tax charge should not be there.  This is again not something that a common-or-garden accountant will have the skills in.  Saying it is "unfair" won't cut it.  There is a guy called Julian Martin who had to give some of his pay back.  His advisers found ways in which the legislation was worded meant he could have negative earnings and get some tax back.  You need that kind of thing in the legislation. Julian Martin though had a painful journey through the courts.

If it is just you taking this to the FTT, taking professional advice and presenting your case as best you can, this will cost you a good half or more of whatever you think you have lost.  So if you go this way, you need to team together with other people in a similar situation.  Talking to tax specialist in the pensions / dispute resolution area will be key for this.  There are other routes though, such as getting the newspapers interested enough to run a story about you and finding other people that way.

You also need to take tax advice on what to put on your 2024/25 tax return.  Based on what HMRC says, you have a tax liability and, if that is right, you have to report it on your self-assessment return.  What you report and what white space disclosure you make will be "interesting".  If you don't take personal advice then HMRC may well feel that you have been careless and want to charge significant penalties.  If you take advice and ignore it then you will be in the deliberate level of penalties or worse.

In terms of taking tax advice at the time you took the lump sum, you have not shown you have taken any on this thread.  Your comment:

"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".

does not mention tax in the slightest.  Whether or not you have cancellation rights is, as you now know, not the same as "I have looked at this for you and can confirm that if you exercise your cancellation rights then the payments to you and the repayment back to us will be treated in the same way as you never took the PCLS in the first place". But I guess you are fed up hearing that.

I don't know whether you have explored (with a legal adviser who specialises in this area) whether you actually had cancellation rights and, if so, whether you exercised them properly (e.g. did you have to put a hand written letter in the snail mail signed in triplicate on a Tuesday to cancel whereas you just did it all by phone).  If you did not, what are the consequences of that?  Is the administrator now holding the (wrongly) returned PCLS on your behalf, could they never have invested it in the SIPP as a contribution for you and so could now return it tax free since it is still your original PCLS?  No idea.  But this is the kind of argument that someone used to settling disputes with HMRC might be able to use to get you out of an "unfair" tax charge.

I don't know who you used for your pension but I randomly searched through Hargreaves Lansdown's terms and conditions and they say (my emphasis):

HLAM will not provide you with any personalised advice (including investment advice) or recommendations under these Terms, nor is anything on the HL Website or communications from us in respect of your Account to be construed as personalised financial, investment or tax advice.

Because of the quantum, it is definitely worth talking to a lawyer with the skills needed to look at this properly.  I don't know much about the legal side of getting compesation.  However, the cases I have read about getting compensation for negligent (or not) tax advice - where the adviser was engaged to provide tax advice - look very complex and expensive, some going to the Court of Appeal.  I doubt that a pension administrators and their insurers will  want to settle and so will want to go to court.  How much this would cost is something I have no clue about.  But if you were to lose then you will have to pay the administrator's legal costs too.   

If it was me, I would want to understand the terms and conditions, get a recording of any phone calls, and so on.  Then find a decent lawyer and a decent tax adviser who both understand this area.  And I'd try to find other people in a similar situation to share the knowledge/risk/costs. 

I took no advice in Oct 2024 about the tax position.  There was none to take.  I believed (wrongly, it seems) on the basis of advice from the SIPP platform that I had a right to return the PCLS.  That's all there was to it.

I've taken no advice since the FCA clarified its position earlier this week, other than to discuss it with my accountant.  He'd already prepared the 2024/25 ta return but is now deferring submitting it to see what if any guidance comes out, and referring to this matter on the return without admitting there is any liability before the deadline.

Probably won't be having sleepness nights.  What's the worst that can happen?  No-one died ;-).

Thanks for the really comprehensive reply.

soulsaver

Unsolicited communication from Interactive Investor last year:

Taking benefits - your right to change your mind

SIPP

05 Nov 2024

---

Dear investor,

We are pleased to confirm your benefit request has been processed and your 'Benefits Confirmation Pack' is now available for you to review. To view this document please log in to your SIPP account then select ‘document history’ from the ‘account’ menu (person icon) and click on ‘my SIPP documents’ from the Document type options. If you have linked accounts, you will need to select SIPP Account from the 'document history' drop down menu in the top left corner.

Please remember that when pension payments are due to be made, you will need to ensure sufficient cash is available in your account at least 5 days in advance to enable us to arrange payment on the due date. This is particularly important for regular payments. You may wish to consider holding sufficient cash to cover a few months' payments rather than sell holdings on a regular basis, as we will not be able to make-up any regular payments missed due to lack of available cash.

Your right to change your mind

Having set up your new benefits arrangements, you now have the right to change your mind and cancel this decision within 30 days of receiving this email. If you do not want to exercise these rights you do not need to do anything further and payments will be made as requested. If, however, you do want to cancel please reply to this message within the next 30 days to let us know. If you do change your mind any payments that have been made to you will need to be returned to your SIPP.

If you have any questions, please let us know.

Best regards

Customer Services Team

interactive investor

Are your contact details up to date? To ensure full access to our online platform, you need to have a mobile telephone number and unique email address registered to your account. Please visit Account > Personal Details & Preferences > Update Your Mobile Number and / or Update Your Email Address (under “Your Security Settings”)

valiant24

Yes I think you've summarised it correctly.   I did receive the sum tax free but unwittingly may be deemed to have used it all to make a much larger pension contribution than I should have, which is going to trigger a charge of hundreds of thousands of pounds which I would have avoided if I'd just kept the payout.

I ran the sums through ChatGPT and, depending upon the assumptions made about my future tax rate, it may be marginally cheaper to use Scheme Pays if available.

If it all ever happens!

DRS1

Interesting response.  Why wouldn't you go for the repayment of the contribution?

valiant24

DRS1 said:

Interesting response.  Why wouldn't you go for the repayment of the contribution?

Well, that would be lovely!   Can't see it's going to be offered as an option.

DRS1

Well there is a bit in here about refunding contributions.

Individuals' pension contributions

I am not sure about refunding tax relief to HMRC - presumably the SIPP provider never claimed any on the repaid lump sum.