The Finance Bill has blocked a loophole in the new pension rules which let investors make a quick financial gain at retirement.
The bill, published last week, has removed the opportunity for people to take out a single pension policy at the level of the trivial commutation limit the day before they retire and withdraw it the next day, netting £1,500.
The loophole meant individuals getting income tax grossed up on the money going in and getting 25 per cent of the cash out tax-free. The new rules say the trivial commutation option can only be used by people whose entire pension saving adds up to less than the limit of 1 per cent of the lifetime limit, currently £15,000.
At 250 pages, with 350 pages of guidance, the bill is a slimmed-down version of the 350-page draft with 1,000 pages of guidance notes published last December. It contains few other changes from the draft already published.
Paymaster General Dawn Primarolo says: “The Government is committed to creating a modern and fair tax system which encourages work and saving and raises sufficient revenue to pay for investment in public services.”
Standard Life senior technical manager John Lawson says: “IFAs are still not able to give advice after the publication of this bill but that is no reason not to update their knowledge for July when it is likely to become law.”