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McPhail accuses Balls of misleading savers over ASP

Treasury Economic Secretary Ed Balls has misled savers by saying that an alternatively secured pension is just a way for the wealthy to avoid tax, according to Hargreaves Lansdown head of pensions research Tom McPhail.

McPhail says the Treasury could, in many cases, increase its tax revenues by allowing people to choose alternatively secured pensions over compulsory purchase annuities.

Balls told Parliament recently that ASPs “benefit only a small minority at a wider expense to the taxpayer, all as a result of substantial increases in tax rates”.

Hargreaves Lansdown’s figures are based on assumptions for a male aged 75 who survives 10 years and a woman aged 72 who survives 20 years. A CPA for a male age 75 with a 100,000 fund would get a tax bill of 30,695 today compared with 42,250 if the pensioner takes income from an ASP. This is assuming that the client has no dependants other than his wife and both take maximum ASP income.

McPhail says: “We have written to Ed Balls and want to engage in a dialogue with him. We want to know exactly what his intentions are by limiting the use of ASP and how he intends to police it.”

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