Pensions - tax simplification 6 April 2006.

December 2005

Residential Property and other assets.

From the 6 April 2006 the new pension rules will be amended to remove the tax advantages for investing in residential property, fine wines, classic cars and art and antiques, where the benefits are "self-directed".

This is aimed at preventing tax payers benefiting from tax relief, in relation to contributions made to pension funds, for the purpose of funding the purchase of assets for their or their families own use.

The change will remove any tax advantages of holding residential property directly, or other exotic assets within a SIPP. (Self Invested Personal Pension)

Recycling of tax-free lump sums.

Presently it is possible for pension scheme members to withdraw a tax free lump sum which is then reinvested back into a registered pension scheme - this automatically generates the possibility of more tax relief on the amount reinvested.

This scheme will be blocked by inserting an anti-avoidance rule into the new pensions legislation to take effect from the 6 April 2006.