20 October 2006
In light of the recent controversy regarding ASP (Alternatively Secured Pension) Winterthur Life calls for common sense to prevail.
Since the launch of ASP on 6 April 2006 there is no longer the compulsion to buy an annuity at age 75. Speculation suggests that this option could be under threat from HM Treasury and there is the serious possibility that some change will be announced in this year's pre budget statement.
• HM Treasury's view that ASP was designed only for use by those with a religious objection to annuities would appear to be impossible to enforce and would also appear to clearly breach the law
• The other concerns of HM Treasury seem to be that ASP is being marketed as a mass market product designed for tax avoidance. Clearly it is not a mass market product and will be self-limiting by design - an individual has to be at least age 75 to commence ASP; and the majority of 75 year olds will either, not have pension funds, have already taken an annuity or will not have pension funds large enough to even consider ASP
• The figures show that with the imposition of IHT on left over ASP funds and income tax on any funds that are allocated to beneficiaries, the tax take to the Exchequer could well be higher than if an annuity is purchased.
Mike Morrison pensions strategy manager at Winterthur Life, says, "It would appear that HM Treasury has three options - to leave ASP as is, to abolish it totally and revert to annuity purchase, or to redesign ASP to address its concerns.”
Morrison believes it would be a retrograde step to abolish it totally - annuity rates have fallen some 40% in the last 10 years and do not look like improving. At the same time equity markets are performing well. Therefore:
• Why should people who have taken advice and built up decent pension funds be restricted by how much they can take out each year - a 40% fall in annuity rates is a factor beyond people's control
• Why should people be forced to convert an equity based pension portfolio into a gilt backed investment at a time when the markets are so high?
Winterthur Life, a leading pension provider, hopes that pragmatism will save the day and that ASP will remain, albeit with a fresh design that the majority is happy with.
Morrison continues, “Why not introduce a minimum income such as 35% of GAD rates which was the old income drawdown minimum - this would give a further income tax take. Another solution might be to replace the IHT charge with a flat rate special tax charge at say 35% or 40%, so that charges would apply even if the residue was to be used to provide benefits for a spouse or dependant. This would do away with all the extra administration needed to address the IHT charge and to monitor the continued existence of a spouse or dependant, thus saving cost.
“At a time when confidence needs to be instilled for the new ‘Personal Accounts’ regime, another U-Turn would achieve the total opposite and could even lead to a regrowth in the practice of taking scheme assets offshore to invest.”
-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 an experienced provider 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 is the leading insurer in Switzerland, and ranks among the top ten all-line carriers in Europe. With a history spanning more than 130 years, Winterthur's life insurance, pension and non-life businesses are based mainly in Western Europe, but the group also has activities in Central and Eastern Europe, the US and Asia. Using a variety of channels, the group manages a balanced product portfolio for private clients as well as small and medium-sized companies. Winterthur operates in 17 countries, and has around 19,000 employees and 13 million clients worldwide. In the first half year of 2006, the group achieved a business volume of 18.8 billion Swiss francs, and reported assets under management of 157.4 billion Swiss francs as of June 30, 2006. Winterthur is a 100% subsidiary of Credit Suisse Group, a leading global financial services company headquartered in Zurich. Further information about Winterthur can be found at www.winterthur.com.
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