Tories reaffirm ASP commitment
The Conservatives have promised to look into the punitive tax treatment of alternative secured pensions as part of their general election manifesto.
In a letter to Sipp provider AJ Bell, which has been fighting for a review of the rules, Mark Hoban shadow financial secretary to the Treasury, said: "You argue a powerful case for the form of the tax treatment of the lump-sum payment on death."
He said the Tories had yet to formulate their tax policy in this area but pointed out they had supported efforts to end compulsory annuitisation and it had been a commitment in the 2005 manifesto.
He promised the party would "look at this area very carefully" in drawing up the manifesto for the next election.
AJ Bell wrote an open letter to Alistair Darling, chancellor, and George Osborne, shadow chancellor, in March calling for the tax on lump payments on death in ASP to be cut from 82 per cent to 55 per cent.
Andy Bell, chief executive of AJ Bell, described the rules as "grossly unfair", pointing out someone could die before the age of 75 and their full pension fund could be payable tax free but after 75 within an ASP it would be taxed at 82 per cent.
He has since had meetings with the Conservatives and responding to Mr Hoban's letter, Mr Bell promised to continue to push for change.
He said: "The Conservative party has entered into constructive discussions on this important issue at a senior level and it is clear that the strength of our arguments have been accepted."
But he said he was disappointed that two months down the line the government had not yet responded to his call for a review of ASP tax charges.
ASPs were originally introduced as an alternative to buying an annuity at 75 for those that objected to them on religious grounds.
Avoiding buying an annuity appealed to many others but Carl Melvin, managing director for Pension Transfer Solutions, said the tax regime was so punitive most people did not use ASP.
He said: "The government has made it clear it does not want to use income drawdown beyond the age of 75. Behind this is the fact the government does not want to lose tax revenues.
"People have chosen to build up pension funds, that is their private wealth and to be punished for choosing not to buy an annuity seems harsh.
"The problem AJ Bell has is there are not enough people using ASP for it to be a big issue. It is people who already have sufficient income. This is pension money they do not really need."