ALTERNATIVELY SECURED PENSION (ASP) Pre 5th April 2011

Alternatively Secured Pension (ASP) has been abolished for new and existing pensioners. There are now two types of drawdown pension; capped and flexible. Both are available from age 55 or earlier if the customer has a protected pension age and there is no upper age.

The following is only to provide a historic guide to ASP (pre 5th April 2011).

If you reached age 77 prior to 5th April 2011, if you wish to continue drawing an income rather than set up an annuity, your pension funds will be switched into Alternatively Secured Pension (ASP). ASP is similar to income drawdown, but with more restrictions.

The main features of an Alternatively Secured Pension were:

• ASP can only start at age 77. It will normally start on the pensioner’s 77th birthday – however there are some circumstances where ASP can start after age 77 (for example where a widow/widower inherits an income drawdown fund on his/her spouse’s death).

• You retain ownership of your pension fund and control over your investments with the potential for continued fund growth

• Benefits must be crystallised before age 77 by way of an income drawdown (USP) plan or the right to take a tax-free lump sum will be lost

• Like a Pension Drawdown plan it continues to provide a degree of flexibility.

• The income must be reviewed annually

• Funds continue to be invested in a tax efficient environment.   ASP funds can be transferred to another pension scheme after income drawdown has started

• The whole of your ASP fund can be passed to your spouse without any penalty on your death for them to take benefits in whichever way they choose, which will depend on whether they are above or below age 77

• The maximum income you can take at age 77 from ASP will be approximately 25% less than the same fund would have provided in income drawdown.
• You have to take a minimum income of just under 50% of the income the same fund would have provided in income drawdown.
• As with drawdown the income limits are fixed until the next review.
• These amounts must be reviewed every year, so the GAD calculation will be done yearly, rather than the five-yearly review with drawdown.

• You can use all or part of your ASP fund at any time to buy a lifetime annuity. Annuity rates improve as you get older.  However, ASP income limits are always calculated as though you are age 77 regardless of how old you actually are. Therefore the older you are, the more competitive an annuity income becomes when compared with the maximum income available in ASP.

• As with income drawdown, the income and fund value can fall as well as rise and this might affect your standard of living. The death benefits under ASP are less flexible than income drawdown. One important point about ASP is that it is not possible to take any tax-free cash from it. If you want to take tax-free cash (and most people do) you must elect to take it before your 77th birthday by going into income drawdown first, even if you decide not to take any income.