11 November 2005
UK employees could lose £3 billion in tax-free lump sums unless pension providers “take action”, says Standard Life.
The company says almost quarter of a million of its customers could be at risk from losing out on cash lump sums after A-day, when anyone taking retirement benefits will be limited to 25 per cent of the total value of their pension as a cash sum.
Standard Life has decided to gather information on customers it believes will be affected by the decision in order to pay out a lump sum when the individual retires.
Head of pensions policy at Standard Life, John Lawson, said: “This is a complex issue so we’ve taken a decision to identify which of our customers are likely to need our help.
“This will not affect only those who are high earners – many ordinary scheme members could be at risk of losing out,” he added.
On April 6th next year the government is to announce a new single tax regime for pensions.
Under the new act, the government says pensions will become simpler to understand but critics say the framework for the new self-invested pension regime is unlikely to be ready until 2007, leaving consumers confused over how it will affect them.