Closing a loophole that allowed holders of small self-administered schemes to pass on assets to family members tax-free will create another distortion in the market, says Rowanmoor Pensions director David Seaton.
Proposals in the pre-Budget report for an 82 per cent tax charge on unused scheme pension assets were meant to bring SSASs in line with alternatively secured pensions.
But Seaton says as the administrators of scheme pensions cannot pay the money to charity tax-free, this has created an unlevel playing field.
He says: “This is a crazy situation because they said they wanted to make it like Asps but under these rules the scheme administrators cannot pay the money to charity.”
Standard Life marketing technical manager Andy Tully says: “If you apply logic to it, it does seem a bit odd but I do not think a lot of this is driven by logic.”
AJ Bell chief executive Andy Bell says: “I am yet to receive an explanation from the Government as to why the neutralising tax charge on unused pension funds is 82 per cent and not 55 per cent in keeping with the tax charge on excessive funds over the lifetime allowance.”