A pensions expert believes the industry has lost sight of its aim to ensure that pension funds remain dedicated primarily to the provision of retirement income.
Ken Wrench, chief executive, Open Annuities Limited, says the workings of the tax system mean that pension schemes are being confused with tax-advantaged savings plans.
He argues since the proposal for Alternatively Secured Pensions (ASP) to be implemented after 6 April 2006, many product designers and financial advisers have looked at ways of exploiting the use of ASP as an alternative to annuity purchase to enable individuals to retain control indefinitely over the investment of their pension fund and for the residual capital value to be passed to their surviving family or others.
In a written statement delivered to the House of Lords last week, Paymaster General, Dawn Primarolo says: “ASPs were designed to provide an alternative to annuitisation for those with religious objections to risk pooling. They were not meant as a vehicle for inter-generational transfers by scheme members generally.”
Wrench supports the Government’s agenda to monitor the situation to ensure they are not being used for avoidance, adding: “The concept of tax-advantaged pensions being primarily aimed at the provision of retirement income clearly remains - and rightly so.”
He adds: “While I believe there is a strong case for allowing flexibility, an option that would permit an individual to take no (or minimal) income with a view to passing on as much as possible of his/her pension fund to relatives or others after death is a clear break with the stated principle upon which pension tax reliefs are based. Such an arrangement would be more in the nature of a savings plan rather than a pension scheme.”IFAonline
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