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&#39Final-salary plans will become Jurassic perk&#39

The Inland Revenue&#39s proposals for a single pension tax regime effectively rubberstamps the death of final-salary schemes, according advisers and product providers.

They argue that the Revenue&#39s proposals map out a clear future for defined-contribution schemes with final-salary schemes existing as a subset within a money-purchase framework.

The industry has generally welcomed the Revenue&#39s proposals as progress towards true simplification but some are warning that a consequence of moving from eight tax regimes to a single regime will be the sidelining of defined-benefit schemes.

Clerical Medical pension strategy manager Nigel Stammers says: “Under the Inland Revenue proposals, the final-salary regime becomes a dinosaur. The Government says that it is neutral on final salary versus money purchase but the fact that the Revenue is talking exclusively in the language of money purchase means that final salary will be increasingly marginalised.”

Richard Jacobs Pension & Trustee Services director Richard Jacobs says: “With this change of mindset, the Government is rubberstamping the demise of final-salary schemes. The Government is saying the new regime will be money-purchase and final salary is dead except for those idiots that want to keep it. The Revenue proposals give Government backing to killing off final-salary schemes rather than supporting them.”

A Treasury spokesman says: “We have always said that defined contribution is not necessarily inferior to defined benefit. But there is no tacit admission of any preference for defined contribution over defined benefit in these proposals.”


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