The ABI is in talks with the Inland Revenue to allow anyone earning under £30,000 a year holding an ...
The ABI is in talks with the Inland Revenue to allow anyone earning under £30,000 a year holding an AVC or FSAVC to take up to 25% of it as tax-free cash upon retirement, writes Kira Nickerson.
As part of the ABI and Government's work on occupational pension scheme simplification, the ABI has established a working party to examine the issues surrounding the re-admission of tax-free cash under an AVC.
One of the aims of this will be to even the playing field between stakeholder pensions and AVCs, according to Stewart Ritchie, head of pensions at Scottish Equitable. Holders of stakeholder ar to be able to take up to 25% as tax-free cash and run them alongside a personal pension. At the moment only pre-1998 AVC schemes allow for tax free cash.
A circular from the ABI to product providers points out that concurrency between occupational schemes and stakeholders makes stakeholder an alternative to AVCs/FSAVCs for those earning less than £30,000 and who are not controlling directors.
Ritchie said: "The key issue is if you don't allow an equalising lump sum position between stakeholders and AVCs then you are encouraging people to enter stakeholder pensions instead of an AVC when it may not be in their best interests."
While no deadline for the review has been announced, the ABI has conceded that nothing can be done before the introduction of stakeholder on 6 April.
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