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Protect clients’ pensions from new tax

IFAs must contact clients over transitional protection for their pension funds or risk them being hit with a big tax bill, warns Intelligent Pensions.

The firm is writing to all of its clients to explain how A-Day will trigger an additional tax charge under the new pension simplification rules unless steps are taken before April.

Consultancy Tillinghast predicts that 250,000 exec- utives are likely to be hit by the 55 per cent recovery charge after A-Day on pension assets that exceed the lifetime allowance.

Transitional protection allows pension rights built up before April 6 to come into payment from April without being affected by this tax charge.

Intelligent Pensions tech- nical manager David Tren- ner points out that people with pension funds above or close to the lifetime allowance enhanced protection can protect both the existing fund and any fut- ure growth from the recovery charge.

However, as a result, these investors would not be able to make further contributions into the pension after A-Day.

A decision has to be made by A-Day although registration with HM Revenue & Customs is not necessary until 2009.

Trenner says: “This is going to be a huge amount of work for us, although I estimate it will only affect only 100 of our 1,000 clients with Sipps. The message is that clients have to be aware of this now.”

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