Recommendation 27

HM Government Acknowledged

Her Majesty’s Revenue & Customs (HMRC) aims to treat all of its customers with empathy and respect. This includes tailoring its approach to individual customer needs where additional support is required. In circumstances where tax is due, HMRC may refer customers to a free independent Debt Adviser. Where customers access their tax privileged pension savings before they are 55, HMRC has to collect the unauthorised payment charge that is due under the law. However, customers are only taxed on funds they, their family members or other connected persons receive, either directly or indirectly. Where HMRC accepts that a pension scheme member is defrauded of their tax-privileged pension savings as part of a pension scam, they are not taxed on the money they have lost as a result of the fraud. Legislation already requires pension schemes to report to HMRC all unauthorised payments, including when someone accesses their pension before the age of 55 without being eligible for one of the exemptions. HMRC recognises that withholding tax can be an effective mechanism to minimise the reporting and payment burdens on individuals. Whilst pension schemes are required to withhold tax on payments made to scheme members after the age of 55 under pension flexibility rules, it is not clear how this approach could be used to address the concerns raised for those looking to access their pension scheme before the age of 55, particularly if it impacted all transfers or was reliant on schemes involved in pension scams. Responses to the Committee’s Fifth Report of Session 2019–21 19 HMRC will explore with stakeholders whether there are proportionate solutions to the practical issues with this approach. MRC’s discretionary powers are limited. The Commissioners consider exercising these powers when they apply, and the Department has a Pensions Governance Group that advises the Commissioners on this.