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Claire Trott: Tax-free cash scaremongering

I spent several hours this morning poring over my old G60 manual to help work out some ‘scheme specific protected tax-free cash’ calculations in respect of some pre-2006 occupational pension scheme benefits for an adviser.

I was reminded that we are still dealing with the fall out of pension simplification some 14 years later and will probably continue doing so for the next 30 years. I might even be retired before the hangover of these changes finally subsides.

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These calculations were a particularly complex case where the client had been pulled from one scheme to another, I can only assume this was due to conflicting advice over the course of their employment, which was less than 10 years in total.

It resulted in a myriad of forms from different administrators all requiring the other administrators to do their part of the calculation first. Thankfully, as an independent third party with access to all the information in one go, we got it sorted but I can’t imagine how a client would be able to navigate it all on their own in order to protect what is rightly theirs from excessive taxation.

All I need now is for the schemes to accept the overall calculations of the protected tax-free cash and for each of their schemes and provide confirmation so we can file this away. The net result of this will be that the schemes should stay where they are – although the client now will not have to go through this arduous task when they want to access their benefits to benefit from the extra tax-free payments

As I sat at lunchtime listening to the Chancellor, pen poised to write down any hint that pensions would be up for more major changes, I thought back to the A-day changes when they were announced and the hopes and dreams we all had for simplification.

I found myself thinking also about all the changes we have seen since then and the piecemeal way in which it has been implemented.

However, even though my calculation frenzy this morning was a little hard on the brain, it did remind that each change came with a level of protection to ensure that benefits accrued before each change wasn’t taken away retrospectively.

These protections were put in place to protect not only against tax charges but protect the tax-free cash entitlements that had already been built up.

I can never say never, but the scaremongering about the demise of tax-free cash that happens regularly, as well as on Budget day, has so far been unfounded and I hope it remains so.


Claire Trott is director and head of pensions strategy at Technical Connection, part of St James’s Place Group, and chair of the Association of Member-Directed Pension Schemes (AMPS) – the SIPP and SSAS providers body. 

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