IFAs are warning that the Chancellor’ proposed new all-employee share ownership scheme could jeopardise investors and compete head-to-head with AVCs.
Industry experts fear that people who take up the schemes to enhance their pension provision could face the risk of double ruin if their companies run into trouble.
The scheme is set to allow employees to use part of their pre-tax salary to buy shares in their employer’ company before paying income tax or National Insurance contributions. Tax is only paid when the shares are sold and none is paid on any gains.
Encouraging people to buy shares this way could compete directly against free-stan-ding AVCs which are also paid out of pre-tax income.
Scottish Equitable pensions development director Stewart Ritchie says: “It is double jeopardy. Many people have limited income they can dedicate to savings. AVC assets are not invested in the employee’ company and, if their company is in financial difficulties, AVCs will not be in jeopardy but these shares will.”
Millfield Partnership partner Hugh Jory says: “There has been lots of bad publicity about the cost of AVCs.
“But with these shares there is a risk element which is the same as with a single-company Pep.”
Scottish Amicable IT & development director Gavin Stewart says: “It is not a good thing to have your salary and savings in one basket.”