21 July 2006
Winterthur Life has called on the Government to drop its opposition to Alternatively Secured Pension (ASP) which has been introduced as one option for retirement benefits after A-Day.
The pensions and investment specialist claims that wider flexibility and choice introduced as part of A-Day have helped re-stimulate demand for pensions. One of the most important A-Day changes was the removal of the compulsion to buy an annuity by age 75, with the introduction of the Alternatively Secured Pension (ASP). But it is now suggested ASP could be subject to a review to determine misuse.
Says Mike Morrison, pensions strategy manager, Winterthur Life, “If the government now tampers with the new regime, by restricting ASP only to those with a ‘religious objection to annuitisation’ as it has been reported, it will damage confidence and could destroy what is becoming a real opportunity to encourage future contributions. How can they police people’s religious beliefs? And who is to say who has an objection to annuity pooling? This is a ludicrous state of affairs and it may even be subject to legal challenge.
“A-Day has been something of a watershed in pensions and if early signs are consistent then going forward it has had a positive effect. We’ve seen larger contributions made into individual plans, increased AVCs as people see the flexibility and tax-efficiency of saving for retirement, a keen interest in people not buying an annuity - unsecured income and/or alternatively secured pension but also an increase in people buying annuities – a very healthy picture overall and evidence that simplification is working.”
ASP offers a solution for a great many people who require an alternative to an annuity. But with its maximum income limits and a possible double tax charge for any money passed on to the beneficiaries’ pension schemes, ASP is not ideal for everyone. Indeed, there has been little opposition to the idea of inheritance tax on ASP funds – this has been accepted as the price to pay for the extra flexibility.
Morrison concludes, “The idea that ASP could just be available for those of particular religious beliefs is disingenuous – from my experience people are attracted to ASP because of the flexibility and the perceived poor value of annuities. In many cases these are not people with massive pension funds looking to avoid tax – they are normal people who just want to exercise some control over their retirement income and benefits upon death for their families. What we cannot have is changes to the rules affecting these people who have chosen this option in good faith.
“The reality is many people will still be attracted to annuities and it will be the right decision, but they should have the choice - ultimately there may be an answer in combining the two as a strategy. With future consultation on the Government’s national savings scheme, or so-called Personal Accounts, it is important that we build confidence in the pensions industry and don’t kill off the increasing demand we have seen since A-Day - ASP gives choice to all, knowing that it will not be suitable for all.”
-End-
For further information:
Paul Riddell Winterthur Life, Press Office +44 (0)1256 798099
Sandra Fulton Winterthur Life, Press Office +44 (0)1256 798310
Christine Wood Financial Dynamics +44 (0) 20 7269 7253
Notes to Editors
About Winterthur Life UK Limited
Winterthur Life UK Limited is part of Winterthur Group, a leading Swiss insurance company with its international headquarters in Winterthur, Switzerland.
Winterthur Life UK offers pensions and investments for high net worth clients distributed via top tier IFAs and is renowned for its innovative approach to financial products. Its philosophy of transparent product propositions offers advisers a range of retirement and investment solutions with an open charging structure.
Winterthur Life UK is one of the UK’s top 10 providers of single premium personal pensions, trustee investment plans and corporate pensions via IFAs and a leading provider of self-investment retirement plans like Self Invested Personal Pensions (“Sipps”).
Any opinions expressed in this media communication are made as at the date of publication but are subject to change without notice. Past performance is not a guide to the future. The value of shares/units and the income from them can go down as well as up. Exchange rate fluctuations may cause the value of underlying investments to fall as well as rise. Yields are not guaranteed and may fall or rise.
Winterthur Life UK Limited is authorised and regulated by the Financial Services Authority.
www.winterthur-ifa.co.uk
Winterthur Group
Winterthur Group is a leading Swiss insurance company with head office in Winterthur. As an international company, the Group provides a broad range of personal, property and casualty insurance products, as well as insurance solutions in life and pensions that are tailored to the individual needs of private and corporate clients. Winterthur Group has approximately 19,000 employees worldwide. The company achieved a total business volume of CHF 28.3 billion in 2005 and reported assets under management of CHF 153.3 billion as of December 31, 2005.
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