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Euro threat to tax-free cash from pension

The ABI is warning that the tax-free lump sum on occupational pensions could be scrapped under the latest proposals from the European Parliament.

The latest version of its occupational pensions directive would require all benefits from an occupational pension fund to be converted to income. The amendment was passed by MEPs on the economic and monetary policy committee last week.

The directive, which aims to allow cross-border company pension schemes within the European Union, is due to become part of UK law in 2005.

It still has to go to a vote of the full European Parliament and the ABI is urging MEPs to consider reversing the amendments.

It points out that an agreement between European governments last year at the council of ministers said the two principles on which the directive should be based were no interference in national systems and respect for national diversity.

Speaking at a European pensions seminar in London last week, ABI deputy director general Stephen Sklaroff said: “On the face of it, the Parliament&#39s new amendments endanger the tax-free lump sum, which is an important part of the UK&#39s pensions system and a significant benefit to UK savers.

“We are concerned that this change could disadvantage savers at a time when we need to encourage people to save more for their retirement, not only in the UK but in all 15 member states.”

Scottish Life head of communications Alasdair Buchanan says: “This is a serious threat. The document was designed initially to bring down the barriers between the different pensions regimes, but it now seems to have gone off in a completely different direction.”

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