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L&G threatens to withdraw FSAVC

Legal & General says it is considering withdrawing its FSAVC if the Government does not reinstate tax-free cash on the pension top-up vehicle.

L&G could be the first of several life offices to shelve its plan as many believe FSAVCs do not have any place in the post-stakeholder market.

It says unless the Government reintroduces the 25 per cent tax-free cash benefit, which was withdrawn in 1987, it is not fully convinced of the long-term prospects of the plan.

It is considering the move following months of speculation that the Government will harmonise the rules on tax breaks with personal pensions and stakeholder. No confirmation has been given.

L&G pensions marketing manager Andy Agar says: “It is just a question of whether the market is there or not and also part of the wider debate on what the future of FSAVCs, AVCs and the rest of the top-up market will be.”

But Clerical Medical spokesman Tony Bloomer says: “We are not considering withdrawing our FSAVC. We still believe they provide a good advice opportunity for those earning £30,000. We believe tax-free cash will be reinstated although we do not know when.”

Wentworth Rose managing director Philip Rose says: “How can you can have one plan which does not offer tax-free cash when there are alternatives that do?”

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