At least one pension provider has welcomed Treasury Minister Alfred Cannan’s announcement about pension freedom.

As the Manx Independent reported last week, a number of pension providers lobbied against his proposals.

Mr Cannan announced a new Manx pension which will allow holders to withdraw the whole value on retirement, 40% of it tax free, if they so choose from the age of 55.

But a number of private pension providers say that they are worried about the impact pension freedoms could have on tax revenues and increased social security costs.

They urged Tynwald members to vote against the adoption of the Budget until detailed impact studies have been agreed.

In its email, the Isle of Man Association of Pension Scheme Providers says: ’While we are in favour of the principle we are concerned about the possible effect of these changes.

’We consider introducing any measure without carrying these impact studies, could result in irreparable damage to the island’s social security system and hence the economy.’

Current rules for pension savers allow, from age 50, up to 30% to be taken as a tax-free lump sum with the balance of the fund taken as income over time, that income being calculated according to a formula tied to fixed income returns.

For many, this has proved frustrating because the income levels have been consistently low since the financial crisis and the availability of decent quality guaranteed income products has been virtually non-existent for local pensioners.

Members in the new Pension Freedom Scheme (PFS) will be able to access, from age 55, up to 40% of the accumulated fund tax-free with the remainder taken as and when they like, taxed at their prevailing rate of income tax.

There will also be a charge of 10% levied on any transfers made between other types of Isle of Man scheme and the PFS.

This seems to be an attempt to reduce any tax leakage from those who have benefited from tax relief under current rules and who move across to the new scheme where they would gain greater tax-free access.

In a move that came out of the blue, Treasury has also granted additional freedoms to existing pension arrangements.

Currently, a pension pot of less than £50,000 after tax-free cash has been taken (i.e. £71,000 in total) can be fully accessed under what are known as the triviality and remnant rules. These rules will be amended so that the limit is now £100,000 net of tax free cash, which translates to full access for a pension pot of up to £142,000 without having to pay the transfer charge.

Martin Hall, director of pensions at fiduciary and pensions group Optimus, is convinced this is good for the island’s savers.

He said: ’The greatest step forward comes in the form of choice, particularly for the corporate market.

’Most company-sponsored schemes will be making the levels of contributions that will easily fall within the tax-relieved limits of the new scheme.

’They now have an opportunity to review their future staff pension provision according to how people envisage taking benefits in retirement. You may well find that future contributions are diverted away from the limited range of options currently available towards schemes that are more relevant to individual retirement plans.

’As an industry, we have an opportunity, and perhaps a responsibility, to create products to meet that need.’

But, he added, that did not mean the end for the existing pension regime, which he feels can co-exist happily with the new scheme.

’There is absolutely no reason why individuals and companies cannot blend their approach to pensions according to the advantages of different sections of the tax code,’ he said.

’For example, the PFS allows access at age 55 with a 40% upper limit on tax-free cash, whereas schemes under the existing rules provide access 5 years earlier but at the lower tax-free amount of 30%.

’You can envisage circumstances where a blended approach is adopted, and this represents a new challenge for advisers planning retirement for their clients.

’Whereas before there was really only one set of options, now they are multiple, and that can only be good for consumers.’