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PBR: Limits placed on alternatively secured pension funds

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6th Dec 2006
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The rules on alternatively secured pensions (ASPs) are to be tightened from 6 April 2007.

An ASP is similar to an unsecured pension, but has slightly different rules intended to cater for religious groups who have principled objections to buying an annuity. The rule changes will introduce a minimum income requirement of 65% of the annual amount of a comparable annuity, and set the maximum amount for annual withdrawals at 90% of a comparable annuity.

Any payments that fail to comply with these limits will incur a 40% charge on the difference between the minimum income limit and the amount paid as pension income in the year.

"The government may have been pressurised into introducing this type of fund and naively thought that no one would exploit it. People could get tax relief on contributions into the ASP fund, not withdraw anything and then pass that fund to family members," said Chiltern's Paul Howard.

"Now that non-religious investors have recognised the opportunities, the government is restricting the amount that can be retained."

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By AnonymousUser
11th Dec 2006 10:51

Support for the married unit or not
Would my husband and I be better therefore getting divorced and going for the pension splitting rules in order to aviod the 70% inheritence tax charge on the first death?

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By stephenkober
10th Dec 2006 07:48

PBR: Limits placed on alternatively secured pension funds
Your summary of the changes to ASPs proposed in the pre budget report misses the main change completely! Why have you not mentioned that anything left after the death of the pensioner and any dependants will be taxed at up to 70% and then inheritance tax will apply as well?

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By afwatts
11th Dec 2006 17:10

Practicalities
Having had roughly one half of my pension fund converted into annuities on the guaranteed basis offered when I was young, the remaining half of my fund has been reserved for my widow in an alternatively secured fund, so that she may buy an annuity at her age on my death.
It is to be hoped that the final legislation will protect this form of practical arrangement.

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