Pension funds to be hit hard by Finance Bill, says AJ Bell

Pension Funds to be Hit Hard by Finance Bill 2011, said AJ Bell

Pension Funds to be Hit Hard by Finance Bill 2011, said AJ Bell

Following the royal assent of the Finance Bill 2011 allowing legislation changes to bars changing to fixed protection, 935 individuals already registered for primary and enhanced protection are at risk of being worse off, cautioned pensions provider AJ Bell in a newsletter.

People with enhanced protection can still revoke their protection by paying a small contribution to their pension schemes after lifetime allowance drops to £1.8 million in 2012, from £1.5 million now. However, savers with primary protection will not be able to gain from this advantage, said Gareth James, technical marketing manager at AJ Bell.

A total of 3913 persons will continue to hold primary protection without any lump sum protection, a FOI request by AJ Bell revealed.

“A joint research conducted by Towers Watson and Bain & Company showed many European insurers are ill-prepared for the minimum capital requirements of the Solvency II environment and may not able to earn more than their cost of capital, even if the roll-out is postponed till 2014,” said Mr. James.

“We are not expecting HMRC to increase the tax free lump-sum payable to those with primary protection but it can easily solve this problem by allowing individuals the option to switch from primary to fixed protection,” he added.

There are still unanswered questions in the Finance Bill on flexible annuities treatment, said Mary Stewart, sales and marketing director at pensions provider Hornbuckle Mitchell.

“There do not appear to be any later surprises, but we do need of course to look at all the detail, and in any event not every facet of the new drawdown regime has been covered”, said Ms Stewart.

“We are still waiting for follow-on regulations which should be laid next month. These should clarify outstanding issues such as the treatment of flexible and inflation-linked annuities in regard to the minimum income requirement,” she added.

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