Steve Folkard, AXA's head of pensions and savings policy, has commented on inheritance tax and pensions reforms issues raised by the Chancellor's Budget speech.
Folkard said: “Legislation in the 2006 Finance Bill will confirm that Alternative Secured Pensions will be subject to Inheritance Tax where people are deemed to have used the contracts to pass on tax privileged funds rather than draw pension benefits.
“This will not come as a surprise to many as the Revenue's intentions on this issue have been fairly clear over recent weeks.
“However, what is now needed is a practical framework which means that advisers can provide clients with a clear understanding of their options, without ambiguity.
“We have seen what hurried guidance can result in with the early drafts on Tax Free cash recycling. We must avoid this degree of complexity with the proposed IHT treatment of ASP so that clients can receive clear, unambiguous advice with confidence. I am sure the Revenue will have taken comments on board given the complexity of previous guidance.”
Folkard on pensions reform: “Not surprisingly, the Chancellor will defer any major fiscal decisions until after the White Paper is published. However, his strong advocacy of means testing and the tax credit system makes it clear that any state pensions reform will have significant hurdles to overcome if it challenges this structure.”
“With the principle of affordability quoted as being central to the reform, the Treasury have firmly nailed their colours to the mast for the forthcoming debate.”
