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Now it’s a U-turn on protected rights cash

The industry is bracing itself for yet another pension U-turn after the Government appeared to back down on proposals to free 100bn by removing restrictions on protected rights.

This would result in a massive loss in potential income for Sipp providers and a major blow to 10-12 million people estimated to have protected rights savings. Standard Life says up to 4bn a year has flowed into contracted-out personal pensions since 1988, leading to a conservative market estimate of 75bn-100bn.

Scottish Life head of pensions strategy Steve Bee says the move would mark a further Government retreat from its A-Day promises. In September 2006, the DWP proposed removing the restrictions to equalise the treatment of protected rights and voluntary savings in a consultation that closed in October. This would enable people to invest protected rights in Sipps for the first time.

But Standard says the Government has undermined these proposals in the pre-Budget report. The accompanying annuities market report made no mention of the DWP proposals and merely reiterated concerns that lifting restrictions on protected rights could potentially leave the surviving partner with no private pension.

Standard head of pensions policy John Lawson says: “This looked like a done deal three months ago but the issue has now been kicked into the long grass. The industry has been gearing up for this. There is no chance of this now happening in 2007 and the prospects of it happening at all have significantly diminished.”

Bee says: “This would be yet another shock U-turn as the industry saw the DWP paper as a clear statement of intent. Just how far is the Government going to retreat from A-Day?”

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