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Skandia warns over safeguarded rights

Skandia is concerned that inconsistent treatment of safeguarded rights among providers could prove extremely confusing for pension advisers.

Under A-Day rules, individuals can access their contracted-out pension or protected rights from age 50 (55 from 2010) and draw 25 per cent of their benefits as tax-free cash. The same rules do not apply for safeguarded rights, which are protected rights split between spouses after divorce.

Head of marketing Billy Mackay says some providers are ignoring Department of Work and Pensions restrictions on safeguarded rights.

He says some firms have admitted this is because their systems fail to distinguish between safeguarded and protected rights.

Meanwhile, Legal & General is actively marketing the option to clients and claims to have secured legal opinion which enables it to treat safeguarded rights similarly to protected rights.

Skandia says the discrepancy between safeguarded and protected rights is illogical but providers must stick to the rules.

Aegon, Winterthur and Standard Life also criticise the rules but say they are adhering to them.

Mackay says: “Some providers are obviously confused about these rules and this could prove extremely confusing for advisers.”

Winterthur Life pension strategy manager Mike Morrison: “The different treatment is ridiculous. However, if a provider does not obey the rules and pays tax-free cash, the DWP could later deem this an unauthorised payment.”

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