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The issue came to light after Scottish Equitable sought clarification from the Revenue on the rules on unsecured pensions. ScotEq says its technical services team has been getting an increasing number of enquiries from advisers wanting to draw tax-free cash for clients without buying an annuity or going into an unsecured pension with the remaining pension pot and instead transferring remaining funds into a USP with another life office. The Revenue, which has been very vocal about clamping down on any rule brea-ches, confirmed to ScotEq that under the new regime, a USP transfer can only be from an existing USP contract. ScotEq says it believes several insurers are breaching these rules and warns that any client falling foul of the rules could be hit with a tax charge of up to 70 per cent. Head of pensions development Rachel Vahey says: “We are liaising with our counterparts in other life offices to ensure that we all take the same line, as confirmed by the Revenue. Pension simplification has been anything but simple and it is inevitable that there will be teething problems. But this is a particularly worrying misunderstanding that has come to light as anyone doing it is storing up serious tax charges for clients.” The Revenue declined to comment.