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Barred from earning living from Sipps

Sipps are not all they are cracked up to be and IFAs and Sipp providers may not be aware of the pitfall that the Government has arranged for those who reach 75 and be in a position to warn their clients. I had to find out for myself by questioning the Revenue and making them spell out their regulations.

I have a Sipp based on a commercial property, namely a high-street shop and office building in the Midlands, which produces an income of 10,000 a year net of the mortgage and management outgoings. This income will increase as rent reviews come around and is set to continue until 2044.

By the time I reach 75, the rules will have changed and my Sipp, although it may continue beyond that age, will be regarded as an alternatively secured pension by the Revenue, the rules of which stipulate that the maximum income I may receive is 70 per cent of what the pension fund would have produced if I were to buy an annuity with it.

At the most, I might expect my fund to produce an annuity of 5,000, 70 per cent of which figure is 3,500. Therefore, although my Sipp will probably be producing a pension of 12,000 by then, the Sipp provider will thereafter be obliged to slash my income to 3,500 and start building up my new pension with the balance of 8,500 year after year. I should not be in a contributory phase at that age.

I should not have my pension, which I had carefully arranged and and worked for, cut to ribbons just when I need to rely on it in my retirement.

I do not want to be a burden on the state but if I am expected to live on my state old-age pension plus 3,500, how am I going to fund any healthcare that my wife and I might need in the coming years? Council tax or my other outgoings and not going to be similarly reduced. At the same time, build-up of the surplus in my pension fund will be ridiculously large and be of no benefit to me whatsoever.

This measure is discrim-inatory in that it adversely affects people on the sole ground that they have reached 75. It also violates my basic right as a citizen to earn a living from what is a perfectly legal vehicle – a Sipp. The Government is acting beyond all reason in snatching away almost three-quarters of my income and putting it beyond my use. I have written to the Government, the Pensions Commission and the select committee on pensions to protest about the blatant inequity of their actions.

I would welcome any support that your profession can give, especially since if your clients imagine that they can rely on Sipps in later life and discover that the income they thought they had established will be taken away from them and have not been forewarned, there could be accusations of misselling.

don anderson


London, SW19


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