Removal of tax-free cash and marginal relief benefits could work against Government take-up of pensi...
Removal of tax-free cash and marginal relief benefits could work against Government take-up of pensions, because it might policyholders to cancel their existing plans, says IFA Grosvenor House Group.
Comments from Paul Cadde, chief executive of Grosvenor House Group, come ahead of the DWP's Green Paper and the Inland Revenue's tax simplication review, both of which are expected to be published within the next two weeks.
"Even if the rumours of tax changes prove unfounded, in the meantime many clients will have read articles discussing the prospect. This is likely to effect their buying decisions," says Cadde.
"I don't believe the thought of the loss of tax free cash and higher rate tax relief will ever be a major reason our clients will not buy pensions. However, it may provoke the more apathetic into taking an action they'd already wanted to do - for example cancelling their existing pension plans. It may also give the reluctant prospect yet more evidence to throw at the financial adviser as to why they feel investing in pensions is not a good idea. But it will not be the real reason for most of our clients. The real reason, whether we like it or not, is that many clients simply do not like pensions!"
IFAs who want to "limit the damage" should look at alternative savings solutions for clients who are not keen on locking assets into a pension, continues Cadde.
"There are products out there which answer both of the main objections our clients have to investing in pensions - for example, the so-called 'European Annuity'. Some are highly controversial, but others are fully approved by the Inland Revenue and therefore not a problem. Make sure you are well informed of these approved products and let your clients know about them. When they retire, they may still opt for more traditional solutions, but merely knowing these options are available will give many clients the confidence to invest," he adds.
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