ASP Changes
01-08-2007

The government has proposed several important changes to Alternatively Secured Pensions (ASPs) from 6th April 2007. ASP is a form of pension withdrawal available to pension scheme members from age 75. The changes come amidst government concerns that ASP could be used to pass capital which has received tax relief to the next generation. As a result they have proposed new minimum and maximum drawdown rates, which are currently draft legislation. However the changes will apply with effect from 6th April 2007 once the Finance Bill 2007 has been finalised.

Minimum ASP – the following proposals have been made:-

• Pre April 2007 there was no requirement under ASP to draw an income.

A minimum level will be introduced with tax penalties applied for payments below this level.

• The new minimum will be 55% of the amount of annuity for a 75 year old (although the pre budget report indicated minimum of 65%). GAD tables are used to calculate this minimum amount.
• If the minimum is not drawn tax charges will apply. The scheme administrator will be liable to pay the charge of 40% (scheme sanction charge) on the amount the payments fall short of the minimum by.

Maximum ASP – the following proposals have been made:-

• The maximum annual income will change from 70% of the maximum drawdown to 90% of the annual amount of comparable annuity for a 75 year old. This new maximum limit will take effect from 6th April 2007.