Rowanmoor Pensions says the market is turning against ASP, or at least pushing members of pension arrangements against it, for all the wrong reasons.
The SSAS provider says it has seen a number of letters from operators saying benefits for individuals (approaching 75-years-old) electing to go into ASP will have to be donated to charity.
Rowanmoor managing director Ian Hammond says it is questionable whether the approach is “treating customers fairly”.
“It is perfectly reasonable for an operator to say that it will not permit benefits to remain in their pension arrangement subsequent to the death of a dependant in ASP, because under current legislation this could give rise to an unauthorised payment,” he says.
“However it must be remembered that the tax charge resulting from death in ASP is not paid until the death of a dependant who must be over the age of 75 and also in ASP.
“If an individual feels that going into ASP can only mean payment to charity, he could easily opt for an annuity purchase which will remove future flexibility, whereas going into ASP always leaves open the annuity door at a later date should tax changes not be forthcoming.”
Hammond says it is essential full transparency and alternatives are given to pensioners, enabling them to make a decision on how they wish pensions to be paid.
Have Your Say
"Interesting article but I believe Rowanmoor are desperate to hang on to a product which in reality will have little benefit now the death benefits have been all but destroyed in the budget.
"Rowanmoor positioned themselves largely as the true “Family SIPP or SSAS” outfit. The creators of Pension Simplification never intended to create such IHT advantages and have closed most of the loopholes in this area, particularly post age 75.
"In many cases most clients with large surplus pension funds are better to take cash and income earlier rather than later and distribute any surplus to family directly or family trusts which can legitimately be passed down (potentially free of IHT over time). At 75 most people will be better off with an annuity than a reduced income and a residual fund which they are not able to pass on to family. Recent annuity rate increases have helped further.
"People’s expectations were raised by the original legislation and companies jumped on the bandwagon (the marketing of the family SIPP being one such example). People need to get back to the mindset that a pension is one tax efficient way of saving for retirement. It should be balanced with other vehicles. A healthy pension creates a steady income which either provides security in retirement or, for wealthier individuals, a good base income enabling other income or capital to be passed on to children.
"When financial companies get too clever by marketing loopholes they often shoot themselves in the foot. I am surprised that Rowanmoor are falling back on TCF to try and save a product that is either dead or at least moribund."
Tony Moss is Partner at Cumberland Place Financial Management.
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