"A simple statement and a cooling off period would enable them to decide whether they want to pay a large tax bill and whether they are willing to forego future pension savings."
National financial planner LEBC is calling for a cooling off period on pension withdrawals under pension freedoms, to protect those withdrawing without advice from "unexpected tax grabs".
LEBC's appeal follows the announcement by HMRC that it will not be changing the way in which one off withdrawals from pension plans are taxed when withdrawn under the flexible pension freedoms regime.
LEBC wants the Government to change the rules to protect those who access drawdown without taking regulated advice. Since the pension freedoms were first introduced LEBC has called for a 30-day cooling off period to be applied to those who seek access to more than the tax-free part of their pensions, without the benefit of regulated advice.
The firm says a cooling off period would benefit those who want to avoid claiming back emergency tax or having the tax relief on their future pension savings restricted to £4,000 per year.
Kay Ingram, director of public policy at LEBC, said: “LEBC wants those who do not take advice, before accessing their pensions, to be given a clear warning about the tax due on their savings and the restrictions which will apply to any future tax-exempt pension savings. A simple statement and a cooling off period would enable them to decide whether they want to pay a large tax bill and whether they are willing to forego future pension savings.
“The current system means that many without the benefit of professional advice are presented with a large unexpected tax bill and restrictions on building their pension savings in the future. These rules can severely reduce their retirement savings and a warning of this before it is too late is only fair. Timing the withdrawals differently could result in a better outcome for the consumer.”