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Cash ‘sweeteners’ could be taxed

The Government is considering taxing cash “sweeteners” used by trustees to persuade employees to transfer out of final-salary schemes.

Peter Askins, a senior off- icial at the Department for Work, is thinking about a range of options to clamp down on the growing trend of firms offering cash ind- ucements to employees to manage down their pensions liabilities.

Speaking at a recent event held by actuarial consultancy Punter Southall, Askins said: “The DWP has to consider the taxpayer and whether these payments should be taxed.”

He also warned if people accepted cash when they moved their pension “this could be considered wilful deprivation of capital when it comes to assessing benefits”.

Last month, Faculty of Actuaries president Stewart Ritchie warned IFAs would be made the scapegoats for yet another misselling scandal if employers believe they lost out by accepting “sweeteners” to transfer out of final- salary schemes.

Aegon Scottish Equitable head of pensions development Rachel Vahey says: “IFAs are being put into an impossible situation. When tax-free cash is being offered on top of the transfer value it takes a hard-nosed, pension-savvy IFA to turn clients away. We need clarity from Government and the regulators as to how they view transfers to help avoid retrospective action.”

Worldwide Financial Planning IFA Nick McBreen says: “These changes would make the situation even more complicated for everyone. IFAs should steer clear of advising on sweeteners.”

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