Can you afford to lose half of your pension?

The Pensions Ombudsman recently ruled in favour of a personal pension provider (Virgin Money) who deducted an “unauthorised member payment” tax charge of 55% of the value of the policyholders plan value and paid that to HMRC because he failed to take benefits from his plan before age 75.

Virgin Money had written to the plan holder (on at least three occasions) to notify him that he needed to make a decision about which provider he would use to purchase his annuity under the open market option (a facility designed to help pension plan holders choose the most suitable and best annuity from the whole of market).

The plan holder failed to give Virgin Money enough time to complete the transfer to his selected provider Canada Life.

The plan rules were very clear and the Pensions Ombudsman could find no fault in either Virgin Money or Canada Life.

So the moral of this story is if you are approaching age 75, leave sufficient time for the annuity selection process to take place and at least one month (preferably longer) for your pension plan provider to transfer funds to your selected annuity provider.

After all few of us to can afford to lose any of our pension funds that close to retirement, let alone more than half of it.

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