Lump Sum Allowance and Death Benefit Allowance Certificate queries

Gazoza

I have a pension managed by Phoenix Life. The pension plan was originally with NPI. The pension was made up of four identical plans (just because that's the way it was set it up originally in order to provide for future flexibility in drawing pensions).

In November 2020 (for each of all four plans) I took the 25% Pension Commencement Lump Sum (PCLS) and used the remainder to purchase an annuity. The percentage of the standard Lifetime Allowance (LTA) utilised, in total, by these four plans was 15.76% (effectively 3.94%per plan). For each plan the PCLS was £10,557.11, making a total PCLS across all four plans of £42,228.44.

Recently I have received from Phoenix four “Lump Sum Allowance and Death Benefit Allowance Certificates” - one for each plan. Each of these certificates shows:

Lump Sum Allowance used £42,280.14
Lump Sum and Death Benefit Allowance £42,280.14

Across all four policies this amounts to £169,120.56.

Note: I attribute the difference between £42,228 and £42,280 to rounding of the percentages (as these are only to 2 decimal places) and this is not of concern.

It seems to me that they have taken the total LTA percentage originally utilised across all four plans and then applied this percentage to each individual plan. To my mind it seems that either they should have produced a single consolidated Lump Sum Allowanceand Death Benefit Allowance Certificate using the LTA percentageoriginally utilised across all four plans OR they should have produced Lump Sum Allowance and Death Benefit Allowance Certificates for each plan using ¼ of the total LTA percentage utilised.

I have queried this with them and they refuse to rescind the original certificates and re-issue along the lines I have outlined above.

They have go on on to say: “No action is required from your side at this time. The letters are issued for information purpose only and will not affect your ongoing annuities.”

I am less concerned about the ongoing annuities, but I do have other pension plans elsewhere which have not been drawn upon as yet and I am concerned that the information Phoenix have issued is fundamentally incorrect and may impinge upon my future situation.

So, I suppose I have two obvious questions:

1. Is my interpretation correct (and Phoenix's wrong)? Or am Imissing something?

2. Do the Lump Sum Allowance and Death Benefit Allowance Certificates (or the information contained therein) get reported to HMRC or are they purely for my own information?

Any other input also appreciated.

DRS1

You are not alone. I had a certificate very recently relating to an annuity I took out with Standard Life in 24/5. The figure they quoted was not one I recognised and unlike you I could not work out how they got it. I asked Customer Service and I am told my question has been "referred to Technical". I am waiting for their reply. If their response to you is anything to go by I won't like it.

I also asked if they sent the certificate to HMRC - again I am still waiting to hear. But I assume they do. I have seen the same sort of information on a P60 supplied by Scottish Widows for an annuity I started in 25/6. I am guessing but I assume P60s go to HMRC?

Gazoza

Just an interim update:-

I've been round the loop a couple of times, but Phoenix Life just seem unable to grasp the fundamental inconsistency that I have pointed out again and again and they offer no justification for their own interpretation of the figures.

So I have ended up making a formal complaint. The 8 week period on this will be up soon, so will be interesting to see what they come up with (if at all). I expect to have to complain to the Financial Ombudsman and/or the Pension Ombudsman.

To make matters wore they presumed that I want (or need?) a Transactional Tax-Free Cash Certificate and, completely unsolicited and without any explanation whatsoever, sent an 'Application for a Transactional Tax-Free Cash Certificate' form. As things stand I can only presume that going down such a path was seen as a means of getting Phoenix Life off the hook for having generated and delivered the incorrect LSA & LSDBA Certificates. Furthermore, HMRC has published guidance making it clear that the certificates should only be requested by individuals who have used less of their available lifetime allowance as tax-free lump sums than under the standard 25% calculation, so a Transactional Tax-Free Cash Certificate is not relevant to me anyhow.

Interesting times!

DRS1

Interesting.

I got a revised letter with corrected figures (no explanation of what went wrong before) so I am happy.

In response to my question about whether the letter gets sent to HMRC the answer was Yes it does.

The TTFC is a Transitional not Transactional certificate.

You are right though - if you used 25% of the old pensions for TFC then you don't need a TTFC.

Hope it all works out.