Government drops plans to fine savers accessing DC pots

27 November 2014

The government has dropped plans to penalise savers who access defined contribution (DC) pots under changes announced in the Budget but fail to alert all their previous pension providers.

We are grateful to Professional Pensions for this report:

In what has been described as a "major U-turn" the Treasury tabled an amendment to the Taxation of Pensions Bill on 24 November, relaxing some of the strictures introduced in October.

The original proposal was to fine savers £300 if they accessed their money without contacting all providers within 31 days, then £60 a day up to a maximum of £3,000.

This was to ensure that providers took account of the tax implications when flexible pension pots were accessed causing the annual tax relief allowance to be reduced from £40,000 a year to £10,000.

The latest amendment extends the deadline for informing providers to 91 days and only requires savers to contact providers they are currently contributing to and those which they contribute to in the future.