AJ Bell calls for tax change on alternatively secured pensions
According to the Sipp provider, with the current volatile markets, the government needs to seriously review the taxation rules on death in ASP, and decrease the amount from 82 per cent to a more fair 55 per cent charge.
Billy Mackay, marketing director of AJ Bell, said: "The Government has an irrational fear that unless you have a penal tax rate, pension savers will use their pension schemes as an inheritance tax avoidance scheme.
"Funds in excess of the lifetime allowance are taxed at 55 per cent and lump sum death benefits at ages younger than 75 are taxed at either 0 per cent or 35 per cent.
"The current economic conditions have dramatically reduced the net wealth of all savers. A tax charge of 55 per cent on lump sum death benefits under ASP would be fairer, more appropriate in the current conditions and would certainly not be open to abuse."
The calls follow a 40 per cent fall in the FTSE 100, which closed down at 3,857.10 on 17 March. This compares to a close of 6,506.20 on 1 October 2007.
Similarly, the yield applying to the Government Actuary's Department's (GAD's) rates on 1 October 2007 was 4.75 per cent. Based on this, a 75 year-old male entering ASP would have received £102 income for every £1,000 of pension fund.
However, the gilt yield that applies from the 1 April this year has fallen to just 3.25 per cent, meaning that the same man would now receive £92 per £1,000 - a fall in potential income of 10 per cent.