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Pension firms blow gasket over turbo ban

The Chancellor’s measures to remove tax relief from tax free lump sums reinv- ested into pensions has been slammed by industry experts as unworkable.

The Government has given no guidance on how pension providers should police this practice, dubbed “turbo-charging”, which firms say leaves them in an imposs- ible position.

Scottish Widows head of pensions market development Ian Naismith says the measure is just a deterrent as it is impossible to determine whether a pension contribution is being paid out of income or is from the proceeds of a tax-free lump sum.

The Chancellor proposes to remove the tax advantages when lump sums are recycled back into funds in order to generate artificial levels of tax relief. The Government has also said that it will be introducing a package of supplementary measures to ensure pension tax rules close this loophole but no details have been released.

Norwich Union head of pensions Iain Oliver says: “The tax recycling issue has highlighted what little communication there is with the industry at the moment. In what way will providers be able to judge where money is coming from? This appears to be unworkable.”

Pension consultant Ros Altmann says: “How is Brown intending for the industry to police this? What it ultima- tely shows is that he got his figures wrong and as a result is in a mode of panic undoing everything that the Government does not like.”

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