The loophole, which allowed 'Directors style' small self-administered pension scheme members to build a pension pot over the lifetime allowance while avoiding tax charges has been closed by Her Majesty's Revenue and Customs.
The Revenue sees small self-administered schemes as money-purchase schemes, but they say that some people are setting up big schemes containing pension benefit promises without the pension pot to support it.
The investors would then claim enhanced protection at A-day based on this promise, and then pay in contributions to fund it after A-day.
The Revenue has warned that these schemes are unlikely to receive tax approval and could face a 40% tax charge.
Our view
As with anything, the finance industry will find gaps in legislation and the Government will close those gaps.