Summer 2006 Newsletter


Brave New World

Business Not Pleasure

Summertime Blues

All That Glitters...

Casting The Net

Trust Gordon?

It Ain't Over...

One In The Eye

Keep Your Nose Clean

Foreign Affairs

When Is A Car...

Don't Walk Away

Avoiding, The Issue

Brown Is Anti-PC

VAT's Up Doc?

Fuel's Gold

An Age-old Question?

That's Unfair!

Year In Year Out

How Hard To Try?

It's A Rip-Off!

Outlaws Win

Show Some Restraint

Not Our Problem

They Cannot Be Serious?


Pension Disappointments

Pension Disappointments

While the new pension rules were being developed, HMRC suggested that a number of very favourable things would be possible. As A-Day - the introduction of the new regime on 6 April 2006 - approached, they got cold feet. So some of the plans that people were getting excited about over the last year have been squashed at the last minute.

In the Pre-Budget Report in December, Mr Brown ruled out the inclusion of residential property within a tax-advantaged pension scheme. It had appeared that people would be able to put second homes or buy-to-lets in a pension scheme, but the Chancellor appears to have realised that this would pour a huge amount of money into the housing market and probably create an economic disaster. In the meantime, many people had actually made arrangements in the expectation of being allowed to do this, and the U-turn will have cost some people a lot of money.

Then there was "recycling" of pension contributions. Someone worked out that you would do quite well if you put £10,000 into a pension fund, got 40% tax relief from the Revenue, drew 25% straight away as a tax-free lump sum, and left the balance to accumulate. You would have put £10,000 into the fund and it would only have cost you £3,500. So there are rules to stop you doing that.

The third Big Idea was the use of pension funds to shelter assets from Inheritance Tax. Passing on a pension fund to dependants can be free of IHT, and some plans were being developed to use the flexibility of the new pension rules to take advantage of this. But the Budget stepped on those hopes as well.

We will just have to get used to the fact that the tax advantages of pension funds are supposed to encourage people to save up during their working life so they can be paid an income in their retirement. The government seems determined to stop people doing anything more interesting with them!