Alternatively Secured Pension (ASP)

If your client has not committed to buying an annuity before their 75th birthday, currently their options are limited between taking out a lifetime annuity or by using an 'Alternatively Secured Pension'.

What is an Alternatively Secured Pension?

An Alternatively Secured Pension allows a pension fund to remain invested whilst income is drawn from it. This income is subject to minimum and maximum limits set by HM Revenue & Customs.

Unlike an Unsecured Pension, on death a tax charge of approximately 82% could apply if the funds are to be passed to your client’s estate. This charge is not levied if the fund is passed directly to a registered charity.

Alternatively Secured Pension
Pros	Cons
Flexibility - no commitment to buying an annuity.	There is an element of risk - annuity rates may fall and the pension fund could decrease, which could mean a significant decrease in future income.
Any future annuity purchase can be tailored to reflect a client’s circumstances at that time.	Research by Just Retirement suggests only larger fund sizes (£300k+) would survive a prolonged fall in investment performance.
	There are limits (both minimum and maximum) as to how much income can be drawn from a pension fund.
	The tax charge under an ASP is 82% on death unless provision is made to pay the remaining fund to a registered charity or the remaining fund is used to secure a dependant’s annuity, dependant’s USP or dependant’s ASP.
	There are likely to be fees charged for administration and investment management, meaning that the costs associated with these arrangements can be high.
	Whilst it is difficult to be precise, it is generally agreed that total funds should be at least £100,000 before this option is considered.

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