Second tax-free concession for part-timers is ‘too late'
UK - The Inland Revenue's decision to allow part-timers a second tax-free lump sum has come too late to benefit many members, lawyers claim.
Pensions Update 131 has been amended so members who were excluded from a scheme as part-timers – but who accrued benefits under separate full-time employment – can claim a second tax-free lump sum for the pension for their part-time work.
However, the Revenue’s decision will only allow members a second lump sum if they commute part of their original pension for a lump sum on retirement. Additionally, it ruled that any member who declined to take a lump sum – when benefits were originally paid – cannot receive a second.
Law firm Sacker & Partners welcomed the decision, but believes it has come too late to be of much benefit.
Partner Katherine Dandy said: “This is great news for part-timers, but I would say it is rather late in the day. It will not benefit the many people who have settled their claims and already elected how to take their additional benefits. This concession could have been made a long time ago.”
Hammond Suddards Edge solicitor Clare Grice said: “This change of view will doubtless be welcomed by those seeking backdated part-time benefits. At least for those who took a lump sum at retirement in respect of their other benefits in the scheme, the Revenue’s new approach will extend a second opportunity to take a lump sum.
“It is less clear why the Revenue is not extending this concession to members who declined to take any lump sum in the first place. Although these will probably be in the minority – most members take a lump sum of some kind – they may nonetheless be asking why they can’t also benefit.”
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