Alternatively secured pensions look certain to be scrapped or hit with an inhibiting spoiler charge after Treasury Econ-omic Secretary Ed Balls revealed that a rule change will be announced in the pre-Budget report.
He acknowledged it would not be legally possible to restrict Asps to the Plymouth Brethren but said he had to “bring practise and intention into line”.
Mirroring last year’s residential property Sipp U-turn, Balls blamed the industry for marketing the product more widely than the Government originally intended and said the Treasury’s position on who the product was designed for has been consistent.
Balls said with principle-based regulation, it is important to always be clear about your intention, which he said the Government has been, so “nobody is then surprised when you end up changing the rules to make sure the intention is properly captured”.
Sources close to the Treasury say Balls has recently been advised that it was not legally possible to restrict Asps to one religion. Another concern is that scrapping Asps completely could also fall foul of religious discrimination rules.
Balls said: “We will defin-itely say something in the PBR. The danger is that it contradicts our view on forced annuitisation at 75, potentially has some tax problems for us and is outside the original intention.”
Tory Shadow financial secretary to the Treasury Mark Hoban says: “If Ed Balls does a U-turn over this, it will undermine the stability of the pension system and send a clear message that people cannot make long-term decisions based on the Government’s policy.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “These comments are deeply frustrating, misguided and counterproductive. I wish the Government would realise the huge damage this move will do to the pension system, causing a renewed disincentive to save.”
Speaking on Monday night at a Financial Services Forum event in London, Balls said the Treasury will respond on Asps in the PBR because of the “danger it contradicts the view we have taken on forced annuitisation at 75”.