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Advice quandary as decision on AVCs is delayed

IFAs are slamming the Inland Revenue for stalling a decision over whether to reinstate tax-free cash for AVCs and FSAVCs, leaving them in an advice quandary.

IFAs say delaying a decision leaves them unable to give proper advice on whether clients would be better off sticking with AVCs or choosing stakeholder.

The Inland Revenue says it is yet to make a decision on whether to give AVCs and FSAVCs a tax-free lump sum on retirement despite intensive lobbying by the ABI to bring pension top-ups in line with stakeholder pensions.

Carrington Investment Consultants head of retirement planning William Sallitt says: “The Revenue hovering over whether to give AVCs tax-free cash is not helpful. It leaves us in an advice quandary. At the moment, things are weighted strongly in favour of stakeholder over AVCs. It is difficult to advise on whether to continue AVC contributions when we do not know if the Revenue will reinstate tax-free cash.”

Clerical Medical pensions strategy manager Nigel Stammers says: “It is a good idea to reinstate tax-free cash to AVCs. But it is a pity it could not be sorted out for April 5. Until they confirm it will happen, it leaves advice in no man&#39s land.”

Inland Revenue spokeswoman Janis Eate says: “No decision has been made yet. A whole range of things are being looked at on pensions because of the introduction of stakeholder. We are consulting the industry on this and we will certainly be talking to the ABI but there is no timetable to decide on it yet.”

Hunter & Co principal Robin Hunter says: “The Revenue should put the 25 per cent tax-free tax back on AVCs and FSAVCs otherwise, because of concurrency, every one will go for a stakeholder every time.”

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