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Open up Asps rather than axe them

Any assessment of the way the wind is blowing in Whitehall suggests that Asps will be scrapped.

For months now, an argument has raged between Government and opposition parties, the regulator, pension companies and advisers over the status of alternatively secured pensions.

The Government wanted them restricted to people with religious objections to annuities. The industry baulked at this, suggesting that they had to give best advice. They added that legislation about religious discrimination took precedence over comments by a Government minister Ed Balls and FSA advice to take account of his view.

Experts now believe that the Government will get rid of Asps. No doubt, the motives of IFAs will be questioned, with suggestions that advisers forced the Government’s hand by helping people dodge tax in some unspecified way. This will be guaranteed to irritate IFAs intensely who will feel that they did nothing but the best job for their clients.

But the Government will lose too. If it allowed Asps to be used widely, many advisers, with Hargreaves Lansdown’s Tom McPhail at the forefront, have suggested the Revenue would get a revenue gain, that is, some inheritance tax from the Asp arrangements rather than no tax from the annuity.

It would also avoid another change in pension policy, which, taken with other Government actions, have needlessly damaged confidence in retirement planning.

MM hopes the Government will go for the brave option of opening Asps for all.This would benefit the Government, advisers and clients in the long term and preserve one of the better bits of pension simplification. IFAs are hardly a key constituency for Labour politicians anyway.

To throw Asps wide open would benefit many people while to close the option to all would help no one.

If Asps are to be scrapped, may we suggest that reform is better thought through in future so pension policy complies with all legislation, including that covering religious discrimination, so at least such arguments can be avoided in future.

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