Commenting on the pensions changes announced by the Chancellor today, Stuart Davies, Tax Director at Deloitte said: "The principle of Alternatively Secure Pensions (ASPs) was introduced as part of pension reforms to accommodate religious groups with objections to annuitisation.  It seems that the Chancellor is concerned at the potential to use these rules for 'tax advantaged routes’ and that people will use them to pass on wealth that would otherwise be subject to mainstream IHT rules'.

The main changes are:

• a minimum income withdrawal from a pension after age 75 equal to 65% of the equivalent annuity rate;
• a maximum income allowance of 95% of the equivalent annuity rate; and
• a new tax charge on lump sums on death (other than in limited circumstances) of up to 70%.

It’s clear that the Chancellor’s intentions are to block wealthy individuals who use these rules as part of their financial planning arrangements by encouraging people to either buy an annuity at age 75 or to maximise their income withdrawals. There is no continuing benefit to retain capital in a pension past age 75 if it is to be taxed at such high rates.  From a planning perspective, it might be better for wealthy individuals to maximise their income and give it away as a regular gift out of income, if the objective is to reduce IHT liability."

Ends

Notes to editors:

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