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A-day could herald funding bonanza

The onset of the new pension regime in late 2004 to early 2005 will create a bonanza for IFAs as pensionholders look to utilise valuable tax breaks before they are scrapped, the Inland Revenue has admitted.

Under the new regime, there will be a lifetime contribution limit of £1.4m and funds exceeding this figure will be hit by a 60 per cent tax bill.

But the Revenue has confirmed that pensionholders can fund their pensions in excess of this figure before A-day, when the new regime comes into force. Their funds will then become ringfenced from the new rules.

Speaking at the Taxbriefs conference, the authors of the Revenue&#39s simplification of pension taxation predicted a bonanza for IFAs as pensionholders look to take advantage of the old rules.

The Revenue also claimed that many people will benefit under the new regime by being able to take a greater sum as tax-free cash.

The amount that can be taken as cash is currently capped at £150,000 but the Revenue says pensionholders will be able to take as much as £350,000 – 25 per cent of the £1.4m lifetime funding limit – under the new rules.

Inland Revenue simplification team member Robert Inglis said: “The new system is simple. Limits apply only to a very few individuals, anomalies and costs are reduced and it leaves a framework for creative scheme design.”

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