Tax free cash - exercising cancellation rights
04 November 2024Following the announcement of the Autumn Budget, we have started to receive calls on exercising cancellation rights in respect of tax free cash (TFC) and income payments.
Some advisers and clients are choosing to return tax free cash (and income if taken) to their pension in order to protect the tax favourable status and keep future options open.
Taking this action is possible due to the cancellation rights that exist on first moves into Drawdown. These cancellation rights were introduced by the FCA following the introduction of the pensions freedoms act in 2015 to allow customers to review their decisions on first moves into Drawdown.
While the purpose of the cancellation rights is strictly for the purposes of customers reviewing their decisions on first moves into Drawdown, we have taken the decision to accept cancellation requests temporarily also for first moves to Drawdown from clients who have a Wrap SIPP or an Elevate PIA on our platforms and who were in drawdown prior to a transfer to the Elevate PIA or Wrap SIPP. We will update you when this position changes.
Where there have been subsequent moves to Drawdown then cancellation rights do not apply.
IMPORTANT INFORMATION
If you have clients who wish to return the money, please note this important information:
- This only applies to first moves to Drawdown (as covered under the FCA rules). Where there have been subsequent moves to Drawdown in respect of a Wrap SIPP/Elevate PIA then cancellation rights do not apply, and the transaction(s) cannot be reversed.
- As covered above we are temporarily also accepting requests to exercise cancellation rights where this is the first move to Drawdown from a Wrap SIPP/Elevate PIA.
- The cancellation rights apply for 30 calendar days only and therefore we are required to be notified within the 30 day period. Please see below for how to determine if the client is still within their 30 day Cancellation period.
- As this is a reversal of a previous instruction – all monies need to be returned (including where relevant any income paid). If all the money is not returned within 30 days of notifying us, your clients will lose their right to cancellation.
- The process for cancelling these transactions is complex and may take up to 4 weeks once we have all the money returned. As this is effectively a reversal it is not possible for clients to keep some of the money they have been paid; the amounts must be returned in full.
- While this transaction is being carried out, further transactions cannot be processed. Placing further trades may affect our ability to reverse the payment which would potentially impact timescales.
- Once complete the money will be in SIPP Cash/PIA Cash Account and it will be your responsibility to reinvest the money.
STEP-BY-STEP PROCESS
If you have any clients who wish to exercise their cancellation rights, please follow this step-by-step process:
For Wrap clients
- Identify if your client is covered under the cancellation rules and that this is their first move to Drawdown from a Wrap SIPP.
- Check that they are still within the 30 day cancellation period. The 30 day notice period starts when your client receives their Income Withdrawal Notification documents. These are usually placed in the client’s document library.
- Contact us on 0345 279 1001 (option 2 for drawdown team) to notify us that you wish to exercise your client’s cancellation rights.
- Arrange for your client to return all of the money to us into the bank account below as soon as possible. As above this needs to be all of the money taken out including both TFC and any income. We cannot accept partial returns. Only when we are in receipt of the whole amount can we commence the reversal process.
- We ask that the SIPP plan number (D reference number) is quoted on all correspondence/payments. If you use the Wrap account number (WP) it could potentially cause a delay.
Account name: Standard Life Assurance
Account number: 42288230
Sort code: 40-03-28
Payment reference: Plan No (‘D’ reference number not ‘WP’ number)
BIC / SWIFT: MIDLGB22 400328
IBAN: GB53MIDL40032842288230
For Elevate clients
- Identify if your client is covered under the cancellation rules and that this is their first move to Drawdown from their Elevate PIA
- Check they are still within the 30-day cancellation period. The 30 day notice period starts when your client receives their Income Withdrawal Notification documents. These are usually placed in the client’s document library
- Contact us on 0345 600 2399 to notify us that your client wishes to exercise their cancellation rights in respect of their tax free cash payment and/or income,
- Arrange for your client to return all of the money to us into the bank account below as soon as possible. As above this needs to be all of the money taken out including both TFC and any income. We cannot accept partial returns. Only when we are in receipt of the whole amount can we commence the reversal process.
Account name: Elevate Portfolio Services
Account number: 31276146
Sort code: 16-04-00
Payment reference: Plan No (starts with ‘EL’)
BIC / SWIFT: N/A
IBAN: N/A
Should you have any questions please get in touch with your usual abrdn contact.