Pensions firm issues fixed protection warning

Pension members could be throwing their money away by leaving schemes early due to the reduction in the Lifetime Allowance, an investments firm has warned. Broadstone said many pension members and their advisers could overreact to the decrease in the Lifetime Allowance to £1.25m from 6 April 2014.Individuals are being given the chance to fix their Lifetime Allowance at £1.5m after April 6 through Fixed Protection 2014 but must leave their pension schemes by April 5 to do so.The firm said members might not be adequately compensated for leaving pension schemes and the consequent significant savings the employer may be making.{desktop}{/desktop}{mobile}{/mobile}Broadstone pension director Simon Nicol said: "Leaving a pension scheme, particularly some years from retirement, is a hugely significant decision and not to be taken without very good reasons."Those that are in defined benefit schemes should be particularly wary of leaving."Suggestions to leave are based on growth assumptions but these may be "wildly optimistic" and presuppose the pensions system will not change in the next decade, Broadstone warned.Mr Nicol said: "The Lifetime Allowance has become a political matter but if pensions are to retain their relevance the Lifetime Allowance will surely rise at some point or be completely changed."Continuing to accrue tax relievable benefits must still remain an important part of good saving discipline until there are clear and immediate benefits to changing that course of action."To suggest that a pension member forgoes the benefits of an employer's pension scheme to potentially avoid a tax charge at some future date without adequate compensation or clear short term benefit means members throwing money away."

Pensions firm issues fixed protection warning

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