Alternatively Secured Pension (ASP)

Upon reaching age 75 anyone with a pension fund that has not already commenced taking benefits (i.e crystalised) or is taking benefits via Unsecured Penson (USP), must purchase an annuity or go into an Alternatively Secured Pension (ASP).

The ASP option has only become available since 6 April 2006, and is a variation on USP. The facility allows a member to continue (or commence if not already in USP) taking an income from their pension fund (i.e. "draw down") indefinitely.

There are some key basic rules which apply to this form of pension:-

• The level of income available in ASP is calculated by using the GAD tables as supplied by HMRC and the maximum and minimum levels available are different than those available in USP.
• the maximum income allowed is 90% of the comparable annuity income payable as at age 75.
• the minimum income is 55% of the equivalent annuity rate at age 75
• Reviews to set the maximum income limit must be undertaken on an annual basis. However a key point to note is that this remains based upon the annuity rate at age 75, rather than the members actual age
• Payments may be guaranteed for up to 10 years

Whilst you are taking an income, the funds remaining in the plan are invested according to your investment risk profile in order to meet your financial objectives.

There are also different rules relating to the death benefits of members in ASP than those if death occurs in USP, which would have a significant affect on funds passed on to beneficiaries.

An Overview:  Advantages & Disadvantages

Advantages		Disadvantages
Your pension fund continues to have the potential to increase, so you may have a higher fund value with which to purchase an annuity as you get older or withdraw an income You can decide how your money is to be invested Usually, the older you are when you purchase an annuity, the higher annuity rate you should get Your beneficiaries have additional flexible death benefit choices		Whilst invested, your funds can fall as well as rise If the value of your fund goes down, you would have less to purchase an annuity in later years There is an ongoing need to regularly review your pension fund whist in deferment By deferring the purchase an annuity, any annuity cross-subsidy would be missed Lump sum death benefits are severely affected by new rules governing inherited tax-relieved pensions

If you are considering this option, then further details and advice on these issues should be sought by speaking to an experienced financial adviser.