Gripped by annuity scandal

pensions lawyer Paul Baxendale-Walker has launched an outspoken attack on pension fund trustees

for ''upholding Britain's biggest pension scandal'', following last week's report in Money World.

Baxendale-Walker says trustees are defending the present system of compulsory purchase of annuities, which he believes represents a family's ''financial suicide''.

Baxendale Walker, the firm he founded, was criticised in last week's Money World by actuary and pension fund trustee Peter Wylie for advising small businesses to risk the attentions of the Inland Revenue by converting their pension funds into offshore trusts to allow them greater access to the capital.

The theory is that with clever advice it is possible to bypass Inland Revenue rules so pension fund capital can be moved offshore, used to buy much higher value annuities, tapped as loans, and ring-fenced so that it can be passed on as an asset on the pensioner's death. However, the Revenue says its policy is to enforce the present regime and withdraw ''approval'' - the tax exemption on contributions to a scheme -

wherever it believes a ''conversion'' plan has been devised in order to avoid paying tax, or avoid buying an annuity.

Paisley-based Wylie claimed that the Small Self-Administered Scheme (SSAS) of a Glasgow firm where he was trustee and where the directors considered such a proposal from Baxendale-Walker last year, would have lost approved status had it gone ahead, resulting in losses to the fund.

This week a letter from the

Pension Schemes Office (PSO) to Wylie confirmed that had such a scheme gone ahead, ''the approval of the scheme would have been withdrawn''. Wylie, a member of the Association of Pensioner Trustees which represents those appointed as independent stewards of pension funds, has lodged a complaint about Baxendale Walker with the Law Society of Scotland, which has passed it to the Law Society of England and Wales.

But Paul Baxendale-Walker responded: ''I issue an open

invitation to Peter Wylie and to those who stand with him in upholding Britain's biggest pension scandal: justify to our pensioners your 'approved' system of compulsory annuity purchase at (today's) absurd and insulting rates. Explain why your version of 'prudent retirement planning' results in the loss of pensioners' entire life savings.''

With annuity rates tumbling to all-time lows, offering derisory incomes from a large capital fund that effectively disappears when the annuity is purchased, there have been some calls this year for the Government to review the whole regime.

Baxendale-Walker has skirmished with the Inland Revenue, most notably when his client the chef Michel Roux lost a legal appeal against a #1.3m bill after his pension scheme lost PSO approval. This week he composed for Money World a special appeal to pension fund members.

It reads: ''Consider yourself, a superannuation scheme member, rigidly strapped with your pot of pension gold into an antiquated sidecar. Your retirement carriage is attached to a motorcycle driven by your pensioner trustee. You and your funds are mere passengers. Having hitched a ride, you have no power to alter the destination blindly fixed upon by your driver, as dictated to him by a group of unelected Inland Revenue bureaucrats in Nottingham called the Pension Schemes Office.

''You will by now have noticed the roadside signs announcing 'compulsory annuity purchase this way'. And as you grind your rocky and expensive ascent to the summit of Ben Pension, you may even have realised that the inevitable destination of that sidecar and its precious contents is a tumbling, jarring freefall into the chasm of the 5% (or less) annuity.

''Your assisted financial suicide leaves you dead, your life savings gone and your family with nothing. The pensioner trustee who, for a fee, assisted you to give away your life savings, will of course have abandoned that 'approved' vehicle at the last moment.

''A parachute is offered to you, so you may take effective control of your own retirement funds and their destiny. 'Don't dare take it, it might not work,' shouts the driver. 'You mustn't do that, only I know how to drive this thing,' the

pensioner trustee cries as your family's pensions piggy bank is smashed against the compulsory annuity wall of death.

''If it wasn't your money, this might all be comical. But it is your money, your family's retirement wealth, and it is being controlled by those whose professional

mission is to destroy it.

''Of all the bogeys to frighten members of 'approved' pension schemes, the monster of 'loss of approval' is rather less convincing than an ailing Boris Karloff with heavy eyeshadow. You are, with absolute certainty, going to lose 100% of your pension savings. That's right, 100%, because your life office will take all your pension capital, will pay you only some of the income it produces and will keep everything else when you die.

''If you 'SSAS bust' or something more sophisticated, the worst that can possibly happen is that you pay the PSO a tax penalty of 40%. So if you simply throw the pensioner trustee out of the saddle, put your foot on the brake, and prevent the headlong descent of your life savings into oblivion, you are 60% better off.''

Baxendale-Walker added: ''That tax penalty only arises if you break the rules. Good professional advice will provide you with the pensions bargain you ought to have, without breaking the rules, without any tax penalties.''

Last week Baxendale-Walker said that no scheme his firm had advised on had lost PSO approval, unless intentionally.

Peter Wylie said this week that the response from the PSO had vindicated his concerns.

o Annuity Direct has advised

people considering buying an annuity to do so soon. Adviser Stuart Bayliss said there was a

tradition of better value for retirees in the annuity market around Christmas. But this year rates had crept up early, and were as high as a year ago despite increased life expectancy.

''It is unlikely that annuity rates will remain at the current level for more than a few months, as the anticipated demand for gilts and continuing increases in life expectancy place continuing downward pressures on annuity returns.''