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Altmann: Pension Wise leaving consumers open to big tax bills

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Altmann: Pension Wise leaving consumers open to big tax bills

Former pensions minister Ros Altmann has said the government’s Pension Wise service is not enough for people to understand how to avoid getting hit with big pension tax bills.

Altmann told the Financial Times the Pension Wise service alone does not provide enough information to consumers about the recent changes to pensions.

‘Just using the Pension Wise website is not sufficient for most people to deal with the changes and complexities of pensions,’ Altmann told the paper.

‘There is a real concern that people, when withdrawing money from their pensions, could inadvertently land themselves with a big tax bill when making further pension contributions.’

Pension Wise is the government’s guidance service for pensions, which is soon to be merged with the other guidance bodies to create one new service.

MPAA issues

One of the most recent pensions policy changes is the money purchase annual allowance (MPAA) cut.

The MPAA restricts the amount of money people can put back into a defined contribution (DC) pension once they have started taking benefits from their savings under pension freedoms.

Announced in last year’s Autumn Statement, the chancellor Philip Hammond said he was going to cut the MPAA from £10,000 to £4,000, with the change coming into effect in April. However the legislation for the change has not been pushed through parliament yet, meaning it is still unclear how much savers can put in.

The Financial Times report found that there is only a single paragraph on the Pension Wise website about the MPAA cut under the 'Get an adjustable income' section which says: ‘You may be able to keep paying in after you take money out but you could pay tax on contributions over £4,000 a year (known as the ‘money purchase allowance’).’

Malcolm McLean, a senior consultant at Barnett Waddingham, said this information from Pension Wise is not enough for consumers.

‘It is absolutely necessary for the Pension Wise website to highlight the MPAA and what it means for pension savers more prominently on its website. As it stands it is difficult to find and can easily be missed,’ he told the paper.

McLean added the 'vast majority' of most people won't know what the MPAA is.

A Department for Work and Pensions (DWP) spokesperson told the Financial Times: ‘The implications of the money purchase annual allowance are made clear on the Pension Wise website and we encourage people to book a free face-to-face or telephone appointment where they will receive information about how and when these tax rules apply.’

 

 

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