The basic principle when it comes to pension contributions is that once the money has gone in, it cannot be withdrawn until retirement age.
There are a limited set of circumstances where a contribution can be refunded. We are not able to process a refund unless it meets one of the following circumstances.
*Please note: this article applies where the SIPP has been open for more than 30 days.
Refunds for excess contributions
Refunds are allowed for personal contributions when they meet the ‘excess contribution’ condition. This is where the member has made contributions in excess of their UK relevant earnings for the tax year. Refunds can only be made once the tax year has ended.
The tax relief on any excess contribution must go back to HMRC with the remaining balance being returned to you.
If you believe that you meet the conditions for this option please contact us once the tax year in which the contributions were paid and we can start the process.
Refunds for genuine errors
HMRC allows refunds in very limited circumstances when a genuine error has occurred. This is only possible where there was no intention to make a contribution, or the member was not entitled to the contribution.
The most common example is where an employee has left service, but the employer contribution was not immediately stopped.
The genuine error guidelines do not cover circumstances where there has been a misunderstanding of the rules or where the member has simply changed their mind. If a contribution was made deliberately, but later information came to light that meant the member would not have chosen to make that level of contribution, this does not make it a genuine error and such contributions cannot be refunded.
Can contributions be refunded when the annual allowance has been exceeded?
Exceeding the annual allowance is not a reason for a refund. HMRC guidance clarifies that the annual allowance charge cannot be avoided by simply undoing a contribution. In fact, not only will the individual still be liable for the charge, if the contribution was refunded then they would likely also face an unauthorised payment tax charge.