HMRC has caused ‘disadvantage’

Cutting annual allowance to £10,000 could create two-tier system.

Big Ben

Portafina, one of the UK’s largest advisers in income drawdown with some 3,500 cases, responds to the Treasury’s introduction of a £10,000 annual allowance limit for those accessing their pensions from age 55, in a move designed to prevent people from taking advantage of a tax loophole to recycle their pensions.

Portafina is concerned that the new HMRC revisions risk disadvantaging those who choose drawdown over an annuity, creating a two track system and confusing those who have welcomed this year’s pension reforms.

Says Jamie Smith-Thompson:

“Pension reform was designed to enable people to use their retirement funds as they choose, not to allow those who can afford specialist advice to exploit a loop hole in order to reinvest their pensions as a tax dodge.

“But as draft regulations stand, those approaching retirement could be tempted to circumvent the regulations by using an annuity, effectively disadvantaging those who would otherwise choose drawdown because it now suits their circumstances.

“This is clearly wrong and not in the client's interest.

“Failing to treat all retirement savings in the same way is manifestly unfair, and risks undermining the overwhelmingly positive response from those who welcomed the lifting of annuity restrictions. To maintain the current positive sentiment towards saving for retirement via pensions, the government must be seen to be promoting complete equality. Basically, they need to find a better way to stamp out the loophole altogether.

“The alternative is to risk undoing the good work we saw in March by introducing a retrograde and uneven amendment to the otherwise well thought-out pensions reform”.

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