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Tax threat on annuity avoidance

People who fail to buy an annuity by 75 could face Inland Revenue penalties if the delay takes them into the new legislative framework after April 2005.

The Revenue could drop its softly softly approach in the run-up to A-Day if people whose 75th birthday is before April 5, 2005 attempt to get the benefit of the new regime by delaying their annuity purchase.

At present, individuals who fail to buy an annuity by 75 have to get Revenue approval before life companies will allow them to take benefits.

But advisers believe the Revenue will crack down on anyone avoiding making a purchase to take them into the new regime.

The Revenue says people who refuse to buy an annuity could lose tax relief on their fund.

Hargreaves Lansdown pensions research manager Tom McPhail says: “Given the strength of feeling that some people have over the obligation to buy an annuity, it would not surprise me if some tried to resist.”

The Bureaux managing director Peter Quinton says: “If the Revenue takes the view that it is a genuine mistake, they are generally helpful. But if people start delaying on purpose, I think they will come down hard to make an example for others.”

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