The Inland Revenue has left the proposal on Alternative Secured Income (ASI) more or less unchanged despite the fact it is opening up a tax-avoidance loophole, suggests a pension expert after her initial reading of the Finance Bill.
Rachel Vahey, pensions development manager at Scottish Equitable, says on first reading it seems the Revenue's plans to introduce ASI, which will work as an alternative for people who do not want to purchase an annuity at the age of 75, will go ahead intact.
That means the propsals are unchanged on the original design outlined in the second pension simplification paper published in December last year, she adds.
Vahey says she expected the Revenue to take a stricter line on ASI becasue of the issue of death benefits.
Current legislation would, generally speaking, see a deceased pensioner's remaining annuity go back to pooled pot administered by an insurance company – and this rule will still stand for annuities post A-day.
ASI specifically would, however, allow scheme members without dependants to decide whether they want the money to go to a nominated charity or back into the scheme pot instead.
"This opens up several options for high-net worth clients", Vahey says.
While it is not like "cash in hand", she says, it could, for example, benefit children who are members of the same scheme as the deceased.
Surprised the Revenue left the proposal the way it was initially set out, Vahey says people could use the rules this way to their own benefit.
Apart from that, Vahey believes the biggest surprise of the Bill's pension simplification provisions is that there are no big changes.IFAonline
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