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Cash threat in turbo trouble

Pension guru Steve Bee warns the only way that Chancellor Gordon Brown can prevent the recycling of tax-free lump sums back into pensions is by banning tax-free cash.

Scottish Life head of pensions strategy Bee says neither the Government nor the industry has devised a way to police whether pension contributions are genuinely from income. He says an alternative to scrapping tax-free cash would be for adv- isers to police the sector.

But Hargreaves Lansdown head of pensions research Tom McPhail says such a drastic move would fly in the face of pension simplification.

Bee says: “My real concern is when the Government looks at turbo-charging and how to stop it, the only way you can do so is when you take out the tax-free cash, that is it for you – no more investment in a pension.”

McPhail says: “I have spoken to the FSA and the Treasury and it is unanimous that no one sees how you can practically police this without undermining much of pension simplification. The bottom line is that if you allow people to put 100 per cent of their salary into a pension fund with a 250,000 limit, then Gordon Brown should not be surprised that they will do so.”

The Treasury declines to comment.


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