The Government’s proposals for alternatively secured pensions will not discourage people from using the product to stave off annuitisation, says Legal & General pensions strategy director Adrian Boulding.
Some commentators have argued that the pre-Budget report restrictions, including an 82 per cent tax charge on death benefits, will effectively kill off the Asp market.
But Boulding says Asps will continue to be a viable product for people in income drawdown who are not ready to buy an annuity at 75.
He believes the increase in the maximum income people can draw from Asps from 70 per cent to 90 per cent of the annual amount from a comparable annuity will actually encourage more people to use the product.
He says the high tax charge on death benefits and increase in maximum income will encourage people to spend pension income in retirement, which he argues is a positive move.
Boulding says: “Annuitisation is a life change for people who want a secure income and do not want to have to look at markets every day. Asps will still be a viable product for pensioners in unsecured pensions who do not want to annuitise at 75.”
Suffolk Life director of sales and marketing John Moret says: “Being able to take out more income from the pension minimises the impact of the tax charge on death benefits but most people are attracted to Asps because they do not want to buy an annuity and hand over their pension assets to life companies when they die. The Government is still stuck on forced annuitisation at 75 and seems to think that once people reach that age they are unable to make important decisions.”