On 6 April 2010 the normal minimum age at which a UK resident is able to draw his or her pension was increased from 50 to 55. This meant those who wished to draw their pension but were not yet 55 would incur a penalty of up to 55%.
However, as part of the government’s decision to increase the normal pension age it unintentionally introduced legislation which meant those who transferred their pension before the age of 55 to a new provider would also be hit by an unauthorised payment charge of up to 55%.
The government has now said the charge will not be incurred in circumstances where the:
- Sums and assets of an income drawdown fund are transferred to a new income drawdown fund with another provider or,
- Sums and assets underpinning an existing lifetime annuity are transferred to another provider to provide a new lifetime annuity or,
- Sums and assets underpinning an existing short term annuity are transferred to another provider to provide a new short term annuity or,
- Sums and assets underpinning an existing scheme pension are transferred to another registered pension scheme to provide a new scheme pension.
Furthermore, HMRC said clients and providers wishing to conduct pension transfers in the meantime before the legislation comes into force will not need to pay the charge.
