HM Revenue and Customs have said that they will close the loophole that allows people moving from alternatively secured pensions from unsecured pensions at age 75 to avoid a second test against the lifetime limit.
They have said that this will be incorporated into the Finance Bill 2006, which will probably come into force in July next year. The HMRC is still yet to decide on how inheritance tax will be applied to pension assets, and could mean that individuals face three tests against the lifetime allowance.
The broadening of the rules will create some big tax bills to those who do not plan for it, including those who do not factor in any investment growth between the two tests.
Our view
Anything done that is clever and within the rules always gets caught eventually by the revenue! We do not believe this will affect too many people anyway. How many of you have pension funds in excess of £1.5m anyway?