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Following concerns
voiced by industry bodies that the Pensions Bill must be changed,
actuarial consultancy First Actuarial has warned that the launch
of Personal Accounts in 2012 could trigger penal tax charges for
individuals who have taken steps to protect their pension savings
against the lifetime allowance charge.
The firm says that those individuals who have registered for enhanced
protection will see it rendered invalid by being auto-enrolled into
the Government’s new pension scheme.
“Individuals who had built up significant pension savings
by A Day could protect these savings from any future lifetime allowance
charge by registering for enhanced protection,” said director
of First Actuarial, Alan Smith. “This is valuable because
it can protect individuals from a tax charge of 55 per cent on any
pension benefits in excess of the lifetime allowance.”
The firm highlighted that most of the criticism of Personal Accounts
so far has been on the potential loss of means-tested benefits for
low earners, but Smith sees Personal Accounts as having the potential
to be “bad news for high net worth individuals who have planned
carefully for their retirement but fail to realise the implications
of auto-enrolment.
“A simple solution would be for the Government to change the
rules so that building up benefits in a Personal Account does not
affect enhanced protection,” he added.
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Pensions Age June 2008
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