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CAR could trigger pension penalty

Skandia is warning that applying customer-agreed remuneration to pensions could result in an unauthorised payment and has called for clarification from the Revenue and the FSA.

The company says any fees for advice that are deducted from a pension contract must not result in any tax consequences for the policyholder.

It says an unintended consequence of CAR could mean that charges paid from the client’s pension fund could be classed as an unauthorised payment which would attract a tax penalty.

Skandia says the new rules must be drafted so that any payment from a pension contract to a third party in lieu of services rendered in delivering financial advice should not create an unauthorised payment.

The provider also says the FSA must ensure that CAR is VAT-exempt, regardless of whether the adviser is paid via a straight fee, a fee deduction or commission from the product.

Skandia strategy director Michelle Cracknell says it is important that CAR is introduced and applied in a simple way without confusion and inconsistency.

She says: “There should be encouragement for those seeking advice and saving for their retirement. Hence, it should be possible to pay for advice from a pension contract without attracting any tax penalties.”

Hargreaves Lansdown head of pension research Tom McPhail says he believes the Government will ensure that CAR payments will not be classed as unauthorised payments.

McPhail says: “The Treasury is fairly relaxed about commission, so I suspect it will be fairly relaxed about CAR. I do think there should be consistency in regard to VAT under CAR, irrespective of how the adviser is paid.”


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