View more on these topics

Growing problem of pension limit

IFAs with clients who expect to break the £1.4m lifetime limit face an advice dilemma over the Inland Revenue&#39s proposals for transitional protection, warns Scottish Life head of pensions strategy Steve Bee.

Bee says IFAs face a difficult choice between recommending clients to leave their occupational scheme or stay in and risk being hit by the recovery charge.

The Revenue&#39s proposals say an individual wanting to protect rights they think may break the lifetime limit must choose between primary or enhanced protection at A-Day.

Registering for primary protection links the pre-A-Day value with the indexation of the lifetime limit. Enhanced protection is geared at those who will have left their scheme before A-Day and expect the growth of their fund to outstrip that of the retail price index.

The Revenue gives an example of an individual with a pre-A-Day money-purchase pot of £1.12m, opting for enhanced protection and, because the fund grows to £2m while the lifetime limit only grows to £1.8m with indexation, is better off.

This would protect against tax, but the individual has to leave the occupational scheme, which is something that few advisers would want to recommend.

But Bee warns if the limit had risen to £2m while the enhanced protected fund had only grown to £1.8m, the client could blame the adviser for the advice given.

Bee says: “This issue is likely to hit far more people than are likely to be hit by the lifetime limit at A-Day and they will have to elect whether to take protection or not by that date. Taking enhanced protection is code for Get Out of Pensions and I am not sure you could find a single adviser prepared to make a recommendation on this issue.”

Recommended

…but CA says watchdog is undermined…

The Consumers&#39 Association has come out strongly against any appeal on FOS decisions. CA senior policy adviser Mick McAteer, speaking out against IFA trade bodies lobbying for an appeal process, says any additional appeal would further undermine consumer confidence. He says the investigation into whether the FSA can take cases off the FOS if they […]

Axa serves and protects

AXA SUN LIFE Capital Protected FTSE Bond Type: Guaranteed equity bond Aim: Growth linked to the performance of the FTSE 100 index Minimum-maximum investment: £5,000-no maximum Term: Five years and six months Guarantee: Original capital returned in full regardless of performance of index Return: Up to 77% growth at end of term Closing date: March […]

Abbey reduces rates on fixed rate mortgages

Abbey for Intermediaries is reducing the rates on its range of fixed rate mortgages by up to 25 per cent. The new range includes a two year fixed rate at 4.84 per cent, available at up to 75 per cent loan to value, and a five year fixed rate at 5.24 per cent, also at […]

Firms could face paying for pension advice to staff

Companies that offer no contribution to staff pension plans may have to pay for face-to-face advice under plans unveiled by the Department for Work and Pensions this week. A 12-month pilot scheme will look at three ways that non-contributing employers could give pension information. The options are an ABI-backed employer&#39s advice pack, a group advice […]

Neptune’s Burnett looks beyond Greece

Watch Rob Burnett, manager of the Neptune European Opportunities Fund, discuss the Greek bailout deal and its potential implications for European equities. In the video Rob discusses: Why, with the Greek crisis receding, markets can now focus on Europe’s strong fundamentals The resilience of European markets and why the recovery is on a solid footing […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment