As part of his pre-budget speech today (December 6), Brown declared that there will be a “requirement to withdraw a minimum level of income each year from an ASP [Alternatively Secured Pension] fund and the facility to transfer funds on death as a lump sum to pension funds of other members in the scheme will be removed from the authorised payment rules, with these payments attracting an unauthorised payments charge.”
The changes include:
* a minimum income requirement of 65 per cent of the annual amount of a comparable annuity (for a 75-year old) that could be purchase with the sums and assets in the fund. Failure to comply will mean the scheme administrator will become liable to a 40 per cent charge on the difference between the minimum income limit and the amount paid as pension income in the year;
* the increase of the maximum annual withdrawal of income that is permitted from an ASP fund to 90 per cent of the annual amount of a comparable annuity (for a 75-year old) that could be purchased with the sums and assets in th fund;
* the removal from the authorised payment rules the transfer lump sum death benefit option, with the introduction of an unauthorised payment charge of up to 70 per cent where, on the death of a member or on the death of a dependent of the member, any remaining ASP funds are transferred to the pension funds of other members of the scheme.
Brown said: “These proposals will bring practice and policy intention into line and provide a fair balance between meeting the needs of those with principled religious objections to annuitisation and the needs of the wider public.
“However, if these proposals prove unworkable, or there is continued evidence of the use of pensions tax relief to provide capital sums throughout retirement, the Government will consider whether to remove access to ASPs altogether.”
Tom McPhail, head of pension research at Hargreaves Lansdown, says: “There is no surprise that they have imposed a minimum income requirement and no surprise they have tightened up on lump sum death benefit payments.”
However, he added: “The big disappointment is that the Government is still dogmatically wedded to the view that any form of passing pension funds down through generations is fundamentally unacceptable to them.
“And the tone of the document is that it [the Government] is prepared to go further [in tightening of the rules] if it considers it necessary.”