By Mohamed Ali Bernat The Treasury has confirmed that individuals will be able to pay into more than...
By Mohamed Ali Bernat
The Treasury has confirmed that individuals will be able to pay into more than one individual pension account (IPA) at the same time, although many other details surrounding it remain to be clarified.
Two weeks ago the Treasury and the DSS brought in new rules on pensions concurrency. Under these anyone earning less than £30,000pa and who is not a company director can pay into an occupational and a personal pension at the same time.
A Treasury spokesman told Investment Week that the IPA would fit in with this concurrency regime. This means, for example, someone earning below the £30,000 cap could contribute to both an occupational and a personal pension, each of which could be an IPA.
Although Autif has publicly welcomed the IPA document, individual fund groups have been less enthusiastic. In part this is due to the lack of detailed information in the proposals.
The consultation document, which came out last week, has so far not led any funds house to conclude that it has an easy entry into the pensions market.
The IPA can only be accessed through an existing pension plan and forms a tax-efficient environment in which an existing pension provider can link to unit trusts, Oeics, investment trusts, Ucit funds, and EU government bonds. There is no obligation for a pension provider to have an IPA or to include any or all of the above investments in it.
Peter Jordan, pensions brand manager at Skandia, said the IPA was similar to a multi-manager link and pointed out that life companies were already able to provide such links without an IPA.
Autif has long been lobbying the Treasury to provide a wrapper for unit trusts and Oeic funds, which would provide a level playing field in terms of tax. The Treasury has suggested an exemption for IPAs from the stamp duty reserve tax (SDRT), which is applied to unit trusts and Oeics but not to life funds.
How this is to be reclaimed by groups is still unclear. SDRT is typically applied to a fund rather than to individuals as an exit charge, making it uncertain how the tax will be applied in the case of a fund where some unit holders have accessed it via an IPA and some have not.
Alison Michell, senior technical manager at Autif, said the Inland Revenue is expected to release the details of how this will work later this summer.
The SDRT application was one reason unit trust companies initially believed it would be more difficult for them to provide IPAs under the stakeholder regime, which has a 1% cap.
Some groups, such as Jupiter, still express doubt that IPAs could be offered under stakeholder because of the charging cap. If they were, this is likely to increase pricing pressures on fund management groups as a whole. Investors may wonder why a pension, traditionally more expensive than unit trusts or Oeics, is available with a 1% annual management charge whereas investing directly into the fund would cost 1.5%.
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