Rumours that HM Treasury is considering getting rid of Alternative Secured Pensions (ASPs) have prompted Winterthur Life to call for a more measured approach.
ASPs were introduced in April this year as part of the A-Day changes and they function in a similar fashion to unsecured pensions. They are open to those aged 75 or older who do not wish to buy an annuity, but they were only designed for those with particular religious objections to this strategy.
Winterthur believes that there is "a serious possibility that some change will be announced" during the forthcoming pre-Budget statement, based on HM Treasury's apparent misgivings about ASPs as they currently work.
Firstly, HM Treasury's desire for ASPs to be used only by those with religious objections "would appear to be impossible to enforce and would also appear to clearly breach the law", according to Winterthur's report. It is thought that HM Treasury is also concerned that ASPs have been adopted as a "mass market product" for tax avoidance.
Winterthur's pensions strategy manager Mike Morrison has urged HM Treasury not to take a "retrograde step" by abolishing ASPs. He has pointed out that annuity rates have fallen by 40 per cent in the last decade as equity markets have continued to flourish. With this in mind, he argues that it would be unfair on those who have amassed healthy pension funds to be restricted by how much they can take out each year.
He also challenged the logic behind forcing people to change to an equity-based pension portfolio into a gilt-backed investment when the markets are "so high".
He concluded: "At a time when confidence needs to be instilled for the new Personal Accounts regime, another U-turn would achieve the total opposite and could even lead to a regrowth in the practice of taking scheme assets offshore to invest."To read more about getting pensions advice, click here.
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