The firm, like many in the industry, is concerned the Government intends to scrap or spoil Asps because it believes the product, originally intended to religious groups with objections to annuitisation, is being abused to avoid inheritance tax.
The letter sets out the reasons why scrapping Asps and forced annuitisation at 75 would be damaging and says the Government should consider merging the rules on income withdrawal pre and post-age 75.
It says feedback from financial advisers and customers has suggested that Asps encourage pension savings. For many people, being forced to buy an annuity at 75 with the resulting fear of losing life savings in the event of early death serves as a barrier to pension savings. This barrier has recently been unblocked by the availability of Asps.
The taxation of Asps needs reviewing, says Skandia. Current rules surrounding the inheritance tax treatment of Asps are complex and should be simplified. Ultimately Asps should be chosen by consumers as an investment choice, not a tax choice.
Skandia argues consistency of the rules pre age 75 and post age 75 should be considered. The requirements for a secured income and the risks involved need reviewing and Skandia recommends that arrangements already in place for unsecured pensions are built on. The rules for income withdrawal from pensions change at age 75. Merging the rules pre- and post-age 75 should be considered, says Skandia.
Skandia Life head of marketing Billy Mackay says:
“There are great challenges in this area of pension policy: above all to refine the rules of Asp to deliver financial security, flexibility and control, whilst at the same time, ensuring tax neutrality between Asps and annuities. Skandia welcomes continued debate in this area.”