Phoenix Group is in talks with HM Revenue and Customs (HMRC) to discuss its failure to notify clients about changes to their lifetime allowance (LTA) usage.
It has put £3m ($4.16m, €3.5m) aside, along with the £9m it put away in July 2020, to pay the future HMRC bill.
According to HMRC, pension providers must send an LTA statement if their client’s pension was first paid after 6 April 2006 and the firm is paying a pension to the member.
This information must be provided at least once every tax year.
Phoenix Group said in its 2020 financial results: “The customer remediation for operational tax provision relates to tax penalties payable to HMRC following failure to notify certain customers of changes to their lifetime allowance usage.
“The group is currently in discussion with HMRC in respect of these items and the provision represents the group’s best estimate of the likely future costs.
“On acquisition of the ReAssure businesses on 22 July 2020, £6m of obligations were recognised on a fair value basis and a further £3m was recognised in respect of other life companies. The balance at 31 December 2020 of £12m is expected to be utilised within three years.”
‘Extremely sorry’
International Adviser contacted Phoenix and a spokesperson said that no fine or penalty has been issued by HMRC, despite media reports suggesting otherwise.
They added: “We always strive to get things right and we’re extremely sorry for this error.
“We will ensure that the very small proportion of customers that may be impacted will not suffer any detriment.”
Exemptions
HMRC said that firms do not need to provide an annual LTA statement in the following circumstances:
- The member is 75 or older for the whole of the tax year – so the last statement the firm issues is for the tax year when they reach age 75;
- The member’s pension pot has been transferred to another pension scheme – the receiving scheme will issue annual lifetime allowance statements;
- The firm has given pension funds to an insurance company to pay the member’s pension – they tell the insurer the percentage of allowance used for those funds and they issue the statement to the member; and
- From 6 April 2015, where all funds held in respect of a member under the scheme have been extinguished and no further pension or lump sum payments can be made.
The LTA was set at £1,073,100 for 2021/21 and, in March 2021, the government froze the LTA until 2025/26 during the UK Budget.
