Calls for Govt to confirm ASP U-turn

Hornbuckle Mitchell has urged the Government to confirm it has shelved its tough stance on Alternatively Secured Pensions (ASP) and no longer considers them a ‘loophole’.

Previously, ASPs were only permitted to be used by those with a ‘principled religious objection’ to buying a lifetime annuity, says the SIPP and SSAS administration firm.

Yet, the Government appears to have executed a dramatic U-turn by suggesting any pension saver who wants to delay purchasing an annuity until past the age of 75, is free to move their funds into an ASP.

This could potentially give pension funds a chance to bounce back from the impact of recent market turmoil, says Hornbuckle.

Mary Stewart, marketing director at Hornbuckle Mitchell, says: “The Government should make it a priority to reassure clients and advisers by making it clear it does not view ASP as a ‘loophole’, but an option freely available to everyone who feels it is the best solution to their needs.”

She says Ed Balls, economic secretary to the Treasury in 2006, “made it very clear that for non-believers to use ASP would be seen as an abuse of the tax breaks on offer from a pension, and threatened to withdraw ASP altogether if it became a way for people to avoid annuitising at age 75.”

She believes the Government has now dropped the religious restriction, with the Department of Work and Pensions (DWP) saying ASP is an option for anyone nearing the age of 75, to delay annuitisation while their pension fund values recover.

Stewart has accused the Government of using ASP for political purposes; primarily as a reason not to implement the Conservatives’ proposal to suspend the rule forcing savers to take out an annuity at 75.

She considers a suspension allowing people to remain in an Unsecured Pension post 75 would be a ‘far simpler solution’.

“Forcing someone into ASP can dramatically reduce the amount of income available and result in penal tax charges to be levied on funds not left to a dependent,” she adds.

The firm has calculated, someone aged 74, with a £100,000 fund can draw down a maximum annual income of £11,760, but once they move into ASP at age 75, this would reduce to £9,180, under current Government Actuary Department (GAD) rates.

“The Government dug itself into a big hole by trying to enforce a religious restriction on ASP which was never written into the rules, instead relying on threats, uncertainty and disproportionate tax charges,” says Stewart.

She says the firm has been writing ASP business since A-Day but remained nervous the Government could launch a crackdown or make retrospective changes to the rules.