The Government looks set to ban scheme pensions from passing on assets tax-free.
In the pre-Budget report, the Government says it will introduce measures in the Finance Bill 2007 to prevent scheme pensions being used as a route to pass on savings without incurring inheritance tax.
Standard Life head of pensions policy John Lawson spotted the loophole in May and accused Axa of exploiting it to market its SSAS.
The Revenue vowed to clamp down on any abuses, possibly retrospectively, but Lawson said this was not made clear in Axa’s marketing material. Axa strongly denied the allegations.
Lawson says: “Growth in the SSAS and family Sipp market is likely to stagnate as a result of these changes. There is no point investing in scheme pensions because the benefits of any investment gain cannot be passed on at death, yet you run the risk of running out of funds. It would appear that the stay of execution on scheme pension residues has run out.”
But Axa head of pensions and savings policy Steve Folkard says: “SSAS provides flexibility for members on assets. Investments in SSAS are no different to other drawdown products.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “Given the Government’s current attitude, it seems that any loopholes of this nature are going to be firmly closed.”