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Bee says refund investors hit by pension credit

The Inland Revenue should allow pension investors whose funds are hit by the pension credit at retirement to be refunded, otherwise pension saving will be sidelined by Isas, warns Scottish Life.

Head of pensions strategy Steve Bee says rebating funds hit by means testing would stop pensions from losing out to Isas and remove any potential for misselling.

He says his proposal would allow the Government to resolve the problem of misselling and misbuying of pensions by people likely to be hit by means testing without backing down from its flagship pension credit policy, which comes into effect in April.

The Revenue&#39s proposals allow people with “trivial” funds of £10,000 or less to qualify for a refund less any tax credits already given. But Bee says that figure should be raised so pension saving can never act against a saver&#39s best interests.

Industry experts predict that the Revenue&#39s £1.4m lifetime and £200,000 annual contribution limit could pave the way for products that move money from pensions to Isas in the long term, with pension investment only taking place when it is tax-efficient.

Bee says: “Without dealing with means-tested benefits, pensions will be left in the 19th Century while all other products move forward. This proposal removes the risk of misselling and misbuying.”

Newman Houghton & Co consultant David Brunning says: “This is a good idea that would stop people complaining that they are being thrifty now to be poorer later.”


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