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Save our Asps

We need to fight off the threats to alternatively secured pensions

As a typical IFA seeking to provide advice to my clients for their affairs both now and in the future, I am concerned that only a few months on from A-Day, uncertainties exist over alternatively secured pensions.

Is there the possibility that the Government could remove Asps? This would leave us once again with just compulsory annuities for the over-75s, despite A-Day’s promisesThis is a serious fundamental issue, not just for the individual but also for the tax collector and for the state.

For the individual, A-Day brought many pension changes, some of them welcome, some of them less welcome.

Alternative secured pensions, the ability finally to escape buying an annuity and passing on some funds saved throughout lifetime to family members, (albeit subject to inheritance tax), was a great incentive to save. Surely, this is exactly one of the objectives of the legislation.

A great deal of time and care was taken in clarifying alternative secured pensions and in communicating that clarification to our clients.

If Asps are removed, then with them goes one of the main attractions of the new regime and its encouragement to save.

The momentum for drawdown of income (unsecured pension as it is now called) which has built over several years now, should not be allowed to disappear when a client reaches 75.

Asps are not by any means perfect but they do permit the continuation of a strategy which has become both familiar and helpful to clients.

From the tax collection perspective, the issue appears straightforward and, by most calculations which I have seen, the tax collector will be better off under alternative secured pensions.

It may be possible to show that, in certain circumstances, the Government could be less well off if wealthy individuals take advantage of tax relaxations to create very big inheritance-taxable pension funds for their children.

Surely, however, this is something to do with a privileged minority and not with the majority who need to save for their own retirement.

Where people want to save, they should be offered incentives to save in the ways that have been set out and, as we thought, implemented on A-Day.

How would this affect the state – that is, all of us in this together?

From my perspective, we seem to have a major problem with regard to intergenerational transfers of wealth, which was not helped by the Chancellor’s recent changes to the tax treatment of some trusts.

Statistics show us how many more estates today are falling foul of death duties compared with only a few years ago and we can see in society that tax pressures are significant and escalating.

Furthermore, because of increases in longevity, the cost of pension promises which have been made to the retiring generation are far more expensive than were originally envisaged and these costs fall upon the younger generation.

With alternative secured pensions, we have a mechanism that will help reverse this trend in some small way by flowing pension monies from the older generation to the younger generation.

This can only be good for the state, that is for us all. Time for us to lend our support to AspBarry Allaway is senior consultant at the LEBC Group, Plymouth office

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