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Experts say A-day will spark mass move to drawdown

The new Inland Revenue pension legislation will kick off a surge in income-drawdown business as investors hitting the lifetime limit move to avoid punitive tax charges, pension gurus are predicting.

Scottish Equitable pensions development director Stewart Ritchie and Scottish Life head of pensions strategy Steve Bee both foresee a mass move to income drawdown at A-day as individuals with funds of £1.4m take benefits to avoid a 60 per cent tax levy for breaking the indexed limit.

A survey by human resources consultant Mercer last week predicted that 290,000 people would hit the lifetime limit at A-day. Experts warn that there may be a shortfall of drawdown specialists able to advise those affected by the change.

Other investors app-roaching the limit could place their money in fixed interest rather than risk investing in equities, only to see good performance taxed at a penal rate, causing distortions to the market, experts warn.

Bee says: “I can foresee a massive switch into income drawdown on A-day – this will be a massive job for advisers and you have to ask whether there are currently enough of them to deal with it. This would be a good time to set up a drawdown business.”

Ritchie says: “One of the significant winners out of the Revenue review is going to be income drawdown. IFAs interested in pensions should now be looking hard at drawdown.”

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