Abbey for Intermediaries has produced a pensions simplification pack for IFAs containing support material, which they can use with their clients in the run-up to April 6 2006 (A-Day).
The pack will be available from July 2 2004 and contains a guide to maximising business opportunities in the run-up to A-Day, including sample approach letters to use with existing and new clients.
Also included is a guide to the government's proposed simplification of the pensions tax rules and case studies highlighting two issues – securing tax-free cash against A-day changes and allowing phased retirement after A-Day – and demonstrating how IFAs can use Scottish Mutual's Clustered Buy Out Transfer Plan as a solution to these issues post A-Day.
Mike Brown, head of pensions and retirement at Abbey for Intermediaries, says: "A-day has been delayed one year to April 6 2006, but this doesn't mean IFAs should wait until nearer the time to prepare their clients for it.
"The National Audit Office says up to 10,000 people could be worse off following pensions simplification - that's twice the number the government originally predicted - and experts predict that in total, up to 600,000 people could suffer over the next 20 years.”
Abbey for Intermediaries has highlighted in the pack how some of the new pensions rules could hit clients. There will be a new lifetime allowance - initially £1.5m – on an individual's total pensions savings. Any funds above this limit at retirement will be hit by a tax charge of up to 55%. The government will claw back the tax benefits on any excess through a lifetime allowance charge.
From 2010, the earliest normal retirement date will be age 55, which will need to be factored in when it comes to retirement planning.
Abbey for Intermediaries believes Scottish Mutual's Clustered Buy Out Transfer Plan is a solution many of these issues. The Section 32 contract, launched in 1996, offers access to 54 funds – including Abbey's Multi Manager range – a Spousal By-Pass Trust, the option to phase benefits and/or vest using income withdrawal to provide client's with even more flexibility, and a range of commission options for IFAs.