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Pension Income Drawdown

(formerly 'Aternative Secured Pensions')


See also "Annuities" 
After“A day” (6 April 2006) it seemed that it would no longer be compulsory for pensioners at age 75 to buy an annuity with their pension fund.    This was good news to many who were distressed at the low rate of return on annuities.    Instead the Treasury introduced a new pension vehicle called an Alternatively Secured Pension, (“ASP”) which allowed pensioners to retain control of their pension funds.   ASPs also had the attraction that on death the deceased’s remaining assets in the pension fund could pass to a spouse or financial dependent free of inheritance tax (IHT).
The Treasury later said that they had not meant ASPs to be generally available, but were restricted to Plymouth Brethren who have a religious objection to gambling, and hence to the purchase of an annuity.     It is not clear what happens to the many people who had meanwhile taken out an ASP without signing up with the local branch of the Plymouth Brethren.
Apart from illustrating the remarkable lobbying power of the Plymouth Brethren, this did little to clear up the uncertainty as to what alternatives if any are available to purchasing an annuity at age 75, but following the Chancellor's autumn statement  it was announced that ASPs can still be passed on to spouses and certain financial dependants free of inheritance tax, but when they die a 70% tax charge will be levied.  Meanwhhile the holder of an ASP has to draw an income from it which is equiavalent to a minimum of 65% and a maximum of 90% of  a benchmark annuity rate applicable to someone aged 75.  

From April 2011,there are big changes.  New drawdown rules apply, and there is no reariction on the amount of withdrawal if you are getting guaranteed income from private and state pensions of at least £20,000 per year.  You can delay taking any pension income and the tax charges on funds payable on death after age 75 are less penal. see further details