Guides
Alternatively secured pensions Since March of this year, when former Chancellor, Gordon Brown, approved steep death taxes on pensions for the over-75s, pension providers have been looking for ways to entice clients to keep their money in alternatively secured pensions (ASPs) by offering solutions to reduce the high tax charges. An ASP is a scheme that investors enter into at the age of 75 if they choose not to buy an annuity. As it stands any ASP funds remaining on death are used to pay an income to a spouse, civil partner or financial dependant subject to Income Tax. On their death - or if there is no spouse/partner/dependant- the remaining fund is paid as a lump sum subject to 70 per cent tax , and inheritance tax, unless it is paid to a charity. Some pension providers are now offering clients who keep their money in ASPs the facility to reduce their tax bill when they pass unvested funds to heirs. The tax charge on unvested funds could then be reduced for those who have ASP funds in group self-invested personal pensions (SIPPs) and small self-administered schemes (SSASs), which are available for those in company pension schemes. Funds must already be in an ASP when the scheme member dies for heirs to be eligible for the lower tax charge. The tax charge on unvested funds could be reduced for those who have ASP funds in group self-invested personal pensions (SIPPs) or small self administered schemes (SASSs). Funds must already be in an ASP when the scheme member dies for heirs to be eligible for the lower tax charge. If an individual member’s personal funds are less than 25 per cent of the entire group fund, then some ‘unauthorised payment charges’ could be waived. We are not sure how HM Revenue & Customs will react to these schemes, and it is essential to take advice before starting an ASP contract.
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