Alternatively Secured Pension (ASP)
When you reach age 75, any uncrystalised
pension funds can be used to purchase a lifetime annuity or an Alternatively
Secured Pension (ASP). ASP operates in a similar way as USP, but with some
different rules:
·
The maximum income you can withdraw is about 90% of a
level single-life lifetime annuity and the minimum is 55%.
·
These limits must be reviewed every year.
·
Regardless of your actual age, the maximum income will
be based on age 75.
The funds in ASP are invested in a similar
way to a USP arrangement and are therefore subject to investment risk.
You will be able convert your alternatively
secured pension into a lifetime annuity at any time.
In the event of your death, whilst in ASP,
any remaining invested fund value can be used to either:
·
Provide a spouse, civil partner or dependant’s
alternatively secured pension for someone over age 75, or
·
Provide a spouse, civil partner or dependant’s
unsecured pension for someone under age 75, or
·
Provide a pension annuity for a spouse, civil partner
or dependant, or
·
Provide a charity lump sum death benefit, or
·
Provide a transfer lump sum death benefit (where there
is no surviving dependant).
Where unused funds are subsequently used
for the benefit of a spouse, or civil partner, or financial dependant, then
there will be no immediate charge to Inheritance Tax (IHT). However, if on the
subsequent death of that person there are still unused funds remaining, those
unused funds will be taxed for IHT as if they had formed part of the original
pensioner’s estate on death.
Depending on how the original unused funds
are used by any spouse, civil partner or financial dependant, there could be a
further tax charge imposed on the net remaining funds after IHT has been paid.
A Transfer Lump Sum Death Benefit paid to a
charity will not attract IHT.
The responsibility for paying any IHT
liability rests with the pension scheme administrator. This means that the tax
liability can be paid directly from the unused funds.