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Standard criticised on SSAS loophole

Adviser Smith & Williamson has criticised Standard Life’s attempts to plug the SSAS IHT “loophole”.

Standard Life has accused Axa of abusing a SSAS loop-hole which enables small businesses to pass on assets tax-free and in theory allows family members to set up schemes to bypass IHT. The Revenue has vowed to clamp down on any abuses.

But Smith & Williamson national head of pensions Mike Fosberry says SSAS concerns are misplaced and that clients in scheme pensions have to pay more tax than those in other forms of income drawdown.

Fosberry says under a scheme pension, the individual has to get a known level of pension entitlement which would be subject to tax on payment, while under alternative forms of income drawdown, an individual is not required to take any income at all.

He says: “From the point of view of the Revenue, therefore, the scheme pension provision must be rather more attractive as it ensures collection of tax which might otherwise be deferred until some point in the future.”

Standard Life head of pensions policy John Lawson says: “We are not asking for scheme pensions to be scrapped and we accept they are valid. But clients should be warned they might not be able to pass on residual funds without IHT.”

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