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Standard says Govt figures wrong over lifetime limit

The number of people who will be hit by the £1.4m lifetime limit could be three times the figure stated in the Pensions Green Paper, warns Standard Life.

It says the Green Paper only refers to the 5,000 individuals with personal pensions of over £1.4m but does not mention executive pension plans over the proposed limit, which it estimates totals another 10,000 plans.

Standard says people up to or approaching the £1.4m limit will switch from equities to fixed interest as any returns over the limit will be hit by the one-third recovery charge and then taxed as income upon receipt. It estimates this could result in £30bn coming out of equities and into more secure investments.

The Inland Revenue says the taxation of pensions above the lifetime limit is tax-neutral, meaning people neither lose nor gain tax on funds over the limit. But Standard says this double-hit amounts to an effective tax rate of 59 per cent and argues that a neutral rate would be an overall hit of 47 per cent.

Senior technical manager John Lawson says: “People will say &#39why bother being in equities?&#39 We could see £30bn going out of equities and into cash. We want to see an equalising charge rather than a 59 per cent overall penalty. We think 47 per cent would be neutral.”

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