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Put your views on pension plans

The Pensions Green Paper proposes the most radical shake-up to tax and

other rules governing pensions for many years and will affect the advice

you should be giving immediately.

On February 6, Taxbriefs is holding a Sofa-sponsored conference in London

on the ramifications of the review.

Speakers will include Secretary of State for Work and Pensions Andrew Smith

and the leader of the Inland Revenue&#39s Pension simplification review team

Peter Hopkins.

Money Marketing is teaming up with Taxbriefs to let you make your views

known before the conference by answering questions we are publishing over

the next few weeks.

The Green Paper and supporting documents run to over 300 pages and contain

a wide range of proposals which could radically change the pension

landscape. For example, under the Inland Revenue&#39s proposals:

•One universal tax regime will replace all existing regimes (eight,

according to the Revenue) with the same rules applying to a final-salary

scheme and a retirement annuity. Existing benefits would be protected under

transitional provisions.

•A maximum tax-exempt fund for all pension investments of £1.4m

would be established. This is roughly equivalent to the current cost of

providing maximum occupational scheme benefits for a 60-year-old

occupational scheme member subject to the earnings&#39 cap. Any surplus over

the £1.4m would be subject to a “recovery charge” of 33.3 per cent and

would then have to provide taxable income – an effective total tax rate of

up to 60 per cent. The fund limit would be indexed.

•The maximum total pension contribution in any one year would be

£200,000, of which the member could contribute up to 100 per cent of

earnings (or £3,600, if greater). For final-salary schemes, the

“contribution” would be calculated as the increase in the value of

benefits. Excess contributions would be taxable as income via the

self-assessment return.

The Department for Work and Pensions ideas include:

•No change to the state pension age. The DWP dismisses suggestions,

such as those from the NAPF and IPPR, that the SPA should increase to 70.

•No changes to S2P or pension credit, although the self-employed may

be allowed to join S2P on a voluntary basis.

The pension conference will be held on February 6 at The London Goodenough

Trust, Mecklenburgh Square, London. Tickets are £435 plus VAT

(£350 plus VAT for additional delegates), by contacting Taxbriefs on

020 7250 0967 or sending an email to info@taxbriefs.co.uk.

The Green Paper raises many issues on which your views should be heard so

that they can be conveyed to the Inland Revenue and DWP as part of the

consultation process. This week, you have the opportunity to put your views

on the following aspects of the pension proposals:

1: Is the Inland Revenue proposal to replace all the existing tax regimes

with a single new regime practical and desirable?

2: Are the limits of £1.4m and £200,000 about right?

3: What practical difficulties might arise from setting a limit to the size

of each person&#39s retirement fund and level of annual contributions?

4: The Inland Revenue says the new rules will allow it to scrap carryback

of contributions. Would this cause any problems?

5: The Inland Revenue has pencilled in April 6, 2004 as a start date for

the new tax regime. Would you like to see a different timescale?

6: How would your ability to advise lowto middle-income groups be affected

by the maintenance of the existing structure of state pensions and pension

credit?

Please send your responses to Taxbriefs, 2-5 Benjamin Street, London EC1M

5QL or by email to:info@taxbriefs.co.uk.

To download the Green Paper documentation go to:

www.dwp.gov.uk/consultations/consult/2002/pensions/ index.htm

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