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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3925
Experience:  FCCA FCMA CGMA ACIS
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HiI have made a claim to the FSCS regarding a pension investment

Customer Question

Hi
I have made a claim to the FSCS regarding a pension investment (SIPP) which has be declared "in default". My investment was £50,000 pounds. I have received compensation of £50,000 which is very good, the letter received states tax maybe payable on some or all of the compensation. Can you please clarify as I thought the compensation would be tax free.
Thank you
Ian Hart
07836 279915
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello Ian, I am Keith, one of the experts on Just Answer and pleased to be able to help you with your question. I can see why you were warned; to avoid any possibility of taxation the 50K should be put into another private pension scheme. That will protect it from tax. The alternative is that HMRC will, quite understandably, regard the compensation as your withdrawing your pension pot as you are now entitled to do. In that case 25% will be tax free, the balance taxable at your marginal rate which might put you into a higher tax bracket. I do hope that I have shed some light on your position.

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