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Goodbye, ASP. Hello, capped and flexible drawdown?

Further to the announcement at the Emergency Budget in June, HM Treasury have now published a consultation document focusing on the implementation of the new tax rules to replace the existing requirement to secure an income from pension savings by age 75.

Key proposals contained in the consultation document are:

• Alternatively Secured Pension (ASP) will no longer exist, from April 2011.
• Capped drawdown - equivalent to Unsecured Pension (USP) for those over age 75 - will be introduced, for the whole of an individual's retirement.
• Individuals who can demonstrate they have secured a sufficient minimum pension income will be able to drawdown more than the capped drawdown limit in the form of flexible drawdown.
• A new tax rate will be introduced to apply to any unused funds remaining upon death - the Government expects the rate will be around 55%.

The consultation document also indicates that the Government does not intend to make any change to the existing requirement of testing an individual's pension savings at 75 against the Lifetime Allowance. It is also proposed 75 will continue to be the latest age at which tax relief is available on pension contributions.

Responses to the consultation are invited until the closing date of 10 September 2010. The full consultation document is available from the HM Treasury website.

Posted 03/08/2010

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