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New pension rules could hit directors and higher earners

Controlling directors face losing out after the introduction of the latest raft of pension transfer regulations, warns the Income Drawdown Advisory Bureau.

The IFA says anyone who could be disadvantaged by the rule chan ges should consider transferring now.

The changes are part of the personal pension scheme transfer regulations which take effect from April 6. They will have an impact upon controlling directors and older higher earners. The rules will change the calculation of the maximum amount that can be transferred between an occupational and a personal pension scheme.

Controlling directors and higher earners could find themselves having a cap imposed on the maximum level of benefits payable while others may get lower death benefits.

The IDAB says this could cut benefits by as much 30 per cent. The changes could also be bad news for a significant proportion of high earners looking to take drawdown.

Head of marketing David Marlow says: “There are many high-earners in occupational schemes expecting to transfer to a personal pension where there is no cap on benefits but the changes to the underlying calculations in the GN11 funding test means some could lose out by as much as 30 per cent. This is not an across the board situation but in some cases the effect could be dramatic.”

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