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Who carries can on tax-free protection?

Pension experts are calling on Revenue & Customs to confirm whether it is advisers or clients who are responsible for protection of tax-free cash.

Scottish Equitable pensions development manager Rachel Vahey says Revenue & Customs believes the responsibility for claiming enhanced or primary protection lies with the individual and not with the IFA but says that no guidance has been given on the situation with tax-free cash.

She says that while good advisers will ensure that clients are advised on changes, if a client has not contacted the IFA for some time, he or she will be unable to blame the adviser if protection is not obtained.

Standard Life marketing technical manager John Lawson says only high-earners will be affected because they are the only people threatened by the 1.5m lifetime allowance and are more likely to be getting regular advice anyway.

The FSA is calling on advisers to contact all of their clients who will be affected by A-Day changes but the cost of wri- ting to these individuals will run into several millions of pounds.

Standard Life is planning to write to around 250,000 customers in its occupational schemes, including EPPs and contracted-in money purchase scheme members, to tell them of the changes. It estimates this one-off exercise will cost millions of pounds.

Scottish Equitable says well over half of its occupational scheme customers also have enhanced tax-free cash entitlements while around 78 per cent of Scottish Widows’ clients are in the same position.

Standard says around 80 per cent of its Cimps’ clients will have to be notified, as will 70 per cent of its executive personal pension policyholders.

Vahey says: “If individuals have not sought advice on enhanced or primary protection, they cannot turn around and tell the adviser he should have told them about it.”

Lawson says: “There is a possibility that people in public sector schemes, who often do not have an IFA, will miss out.”

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