He said: “One option would be to make a transfer to a DC scheme a ‘benefit crystallisation event’ which triggers assessment against the LTA, but that would be hard to do retrospectively and some people will have already transferred one DB pension while leaving another in place.”
A benefit crystallisation event would mean that excess benefits couldn’t be built up and then moved to a DC scheme.
Mr Robbins added: “Second, the government would not want to allow people who have a DB pension valued at £1m for LTA purposes to save large amounts in DC schemes on top, and avoid any tax penalty as long as they stayed within their AA.
“One solution might be to adjust an individual’s LTA down to take account of their DC savings – so if someone has a £200,000 DC pot, the LTA that their DB benefits are tested against would be £200,000 lower than the standard LTA.”
Rachael Hall, independent financial adviser at Circle Financial Services, noted the OTS solution was “a very simple and effective solution to an overly complex tax problem”.
However, she agreed that “measures will have to be put in place to protect DB pensions from those looking to exploit the system”.
David Penney, chartered financial planner and director at Penney Ruddy & Winter, has been suggesting such changes since 2015.
He said: “Aside from the cost to Treasury, the main complication and hurdle to overcome is the fact that this world create different tax rules for DB and DC.
“If someone can come up with a solution to those problems, I am all for it. More logical. I’ve been saying this for years.”
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