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Revenue leaves door open on lifetime limit

The Inland Revenue’s technical amendments to A-Day rules means investors avoid being tested against the lifetime limit twice, says Scottish Equitable pension development director Stewart Ritchie.

The technical note, sent out last week, says individuals with an unsecured pension after A-Day should be tested twice against the lifetime limit.

But Ritchie says people with big pension funds can go into drawdown or an unsecured pension before A-Day and take minimum income to benefit from investment growth.

He says, under the new rules, people will be able to avoid a double crystallisation if they go into drawdown bef-ore A-Day.

The loophole creates an advice opportunity because the move, which is appropriate for people near retirement age with a pension pot app-roaching the lifetime limit of 1.5m, has to be executed bef-ore April 2006.

Ritchie says clients lose this protection if funds are added to the drawdown pot after A-Day.

He says: “This may mean taking action now and moving additional pots of unvested funds into drawdown before A-Day. This is a rare buy now while stocks last situation.”

But advisers says the Revenue’s briefing note is not specific enough for them to be able to advise with any certainty on the issue.

Origen pensions specialist Mark Stopard says: “We really need to wait until we see the draft regulations. The Revenue’s note probably raises more questions than answers which is a problem because we are running out of time to advise clients before A-Day.”


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