Following changes to pension rules in 2006, Mr R was given advice from Mazars to apply for enhanced protection against any additional tax for breaching the LTA.
As a result, Mr R applied for and was issued with an enhanced protection certificate in February 2008 to prevent a future charge.
Following Mazars’s advice, he also applied for primary protection that would cover him if he lost the enhanced protection.
Unlike enhanced protection, however, primary protection can suffer an LTA tax charge.
Lost protection
When Mr R applied to take some of his deferred pension in 2013, he found that the enhanced protection had been lost because of his employer’s contributions to a pension scheme.
He claims that Mazars did not make him aware that he would lose the protection if his employer contributed to his pension, as he was under the impression that it would only be lost if he, personally, contributed to a retirement fund.
Mr R said he only joined his employer’s non-contributory scheme in April 2006 to qualify for the death in service benefit.
In his complaint, Mr R said he remembers telling Mazars about the new pension scheme in a phone call in March 2006, and claims that Mazars should have picked up that this could conflict with his enhanced protection.
Mazars advice
Mazars denies the accusation and says it gave Mr R adequate warnings about losing the protection if further contributions were made to a pension.
In a letter to Mr R, dated January 2008, Mazars said: “As you have a total fund that is above the life time allowance for pension fund of £1.5m and have ceased all further contributions, then enhanced protection is the most appropriate for your purposes.
“At any time you make a further contribution into your plan then enhanced protection will be cancelled, you will not have the ability to then register for primary protection, the amount of the fund above the LTA […] will be subject to an excess tax charge of 55%.”
The letter added: “If you register for enhanced protection you should not have, nor make in the future, contributions into any of your current plans or create a new pension arrangement. To do so will mean that the enhanced protection will be disqualified and you will be liable to a LTA excess tax charge on taking any part or all of your remaining pension arrangements.”
Ombudsman decision
Ombudsman Mark Hutchings found against Mr R.
In his judgment he said that, in January 2008, Mazars was giving the advice on the basis that no further contributions to any pension were being made.
The advice was given taking into account two pension schemes belonging to Mr R and there is no evidence that Mazars had knowledge Mr R had joined the non-contributory scheme in April 2016.
Hutchings wrote: “Mr R said he told Mazars he was thinking about joining his employer’s scheme in a phone call in March 2006. But that was over a year before he was given advice.
“So I didn’t think Mazars were at fault for not advising about the effect of this scheme if Mr R hadn’t given further details about it or let it know he’d joined the scheme.”
He added: “But Mazars also applied for primary protection at the same time, taking into account the value of Mr R’s declared pension funds. So, if he lost his enhanced protection, he’d be able to rely on the deferred primary protection.
“At the time Mr R applied these were the only two options available to Mr R to protect against the LTA, so I thought it was right for Mazars to apply for both – the enhanced protection as the first position and the primary protection as a fall-back position.
“It follows I didn’t think Mazars have mis-advised Mr R,” the ombudsman said.
