Britons waiting for their pension benefits will have been left in limbo for six months, thanks to continued delays in fixing incorrect legislation following the lifetime allowance ban earlier this year.
In the latest pension schemes newsletter, HM Revenue and Customs said it had finished its consultation on the draft regulations to correct legislation, following the abolition of the lifetime allowance.
It added that regulations will be introduced “as soon as parliamentary time allows”.
But advisers and clients have been waiting for this further regulation for several months already, with many Britons delaying taking their pension benefits or transferring until they receive clarification on the rules.
According to pension professionals, this delay could continue, meaning many people have been left "in limbo".
In its newsletter back in April, HMRC advised some clients to delay taking their pension benefits or transferring until it was able to fix incorrect legislation relating to the lifetime allowance abolition.
At the time, the tax authority set out some examples where certain people should hold off making changes to their pension until LTA regulations were corrected.
This was published a little over 24 hours before the LTA was due to be abolished and said the “regulations will be made shortly”.
But advisers, clients and pension professionals are still waiting.
Andrew Tully, technical services director at Nucleus, told FT Adviser: “We had hoped for [the regulations] in June or so initially (given the ‘shortly’ used by HMRC) but was slower than hoped for and then election got in the way."
But Parliament is closed until October 7, while the party conferences take place.
Tully said: "The earliest these regulations will go into Parliament is early October, and will take a few weeks to then get passed into law.
“So customers and advisers will have been left in limbo for well over six months, with incorrect legislation."
He added: "Platforms and providers are in a difficult position of trying to find ways to help customers who are affected by these errors and want or need to take benefits.
"It’s an ongoing reminder of how poorly the LTA abolition has been implemented.”
Background
The LTA was scrapped in the 2023 Budget, with former chancellor Jeremy Hunt insisting it would be done by April 2024 despite warnings about the tight timeframe. This timeframe was reiterated in last year's Autumn Statement.
The legislation to abolish the lifetime allowance was pushed through in quick timescales and, as reported at the time, many industry professionals said there was insufficient time to deliver a change of this magnitude.
Mike Ambery, retirement savings director at Standard Life, part of Phoenix Group, said the latest update showed the LTA abolition was still ongoing.
“The LTA has been a hot potato over the last year or so. It was initially scrapped and replaced by three new allowances that target the tax-free element of pensions, including a new tax-free cash cap of £268,275.
