Alternative Secured Pension (ASP)

Drawdown after age 75

ASP is a new type of drawdown after the age of 75. For many years the Government and the Revenue resisted pressure to abolish the compulsion to buy annuities at age 75. They argued that pensions are designed to provide income in retirement and they are not be used to allow individuals to pass their pension funds to the family. Therefore it was a welcome surprise when as part of Pensions Simplification, the Government introduced the option to continue with a limited form of drawdown after age 75.

Income Limits

Alternatively Secured Pensions will be paid to you from your pension fund in much the same way as for drawdown before age 75. The maximum income will be 90% of maximum income allowable for a person aged 75. The minimum income will be 55% of the relevant annuity.

The income limits are reviewed every year. The income can be changed each year providing it does not exceed the maximum.

Death Benefits

Most people will probably consider ASP not to maximum income, but to maximise the death benefits for their family. However when you die the remaining fund must be used to provide benefits for your surviving dependants, normally spouse or partner.

If your spouse or partner is below the age of 75, they will have two options:

• Continued Drawdown - continued income withdrawals
• Annuity purchase - A single life annuity without a guarantee period or value protection.

If your spouse or partner is above the age of 75 the options are:

• Continued income under ASP rules
• Annuity purchase

If there are no dependants:

• The remaining funds can be paid as a charity lump sum death benefit without a tax charge
• If a lump sum payment is made anyone (including other pension scheme members) it will be treated as an unauthorised payment resulting in a tax payment as high as 82%

Generally speaking, unless there are special circumstances such as your wife being much younger, ASP is not advisable for two reasons:

• The income is pegged at the limit for a 75 year old so you cannot take as much income you could get from an annuity
• You may not wish to be exposed to investment risk at this age
• The death benefit cannot be paid as a lump sum - It must be taken as income of some sort
• Any death benefits paid as a lump sum will be treated as an unauthorised payment resulting in a tax payment as high as 82%