The actuarial consultancy points out that those individuals who have registered for enhanced protection will see it invalidated by being auto-enrolled into the Government’s new personal accounts scheme.
Individuals who had built up significant pension savings by A Day could protect these savings from any future lifetime allowance charge by registering for enhanced protection from the tax charge of 55 per cent on benefits in excess of the lifetime allowance. But a single payment, such as the first monthly deduction into a personal account would remove the enhanced protection.
Alan Smith, director of First Actuarial says: “Much of the criticism of personal accounts has so far been on the potential loss of means-tested benefits for low earners. But it looks like personal accounts will also be bad news for high net worth individuals who have planned carefully for their retirement but fail to realise the implications of auto-enrolment.
“Also, even if someone does remember to opt out in time in 2012 they will have to go through the same process when they are auto enrolled again three years’ later. A simple solution would be for the Government to change the rules so that building up benefits in a personal account does not affect enhanced protection.”
