22 April 2008
Advisers can watch webcast on retirement options at www.alliancetrust.co.uk/adviser
Alliance Trust
Savings, a leading SIPP provider, today urged all those saving for retirement
to consider carefully all their options for taking income from their SIPP as
they approach the age of 75. Alliance
Trust also notes that the government and pensions providers should help clarify
widely held misconceptions about pensions rules, such as that annuities are the
only option for people aged 75 and over to take SIPP income, when this is not
the case.
"Many people saving for
retirement will be confused about their options, and should consider the
different types of income available when they retire. It is not true that all
individuals must purchase an annuity by age 75. Some pensions, SIPPs for
example, allow individuals to continue to withdraw an income directly from
their pension fund under the Alternatively Secured Pension (ASP) rules,"
Steve Latto, Pensions Development Manager for Alliance Trust, commented.
To help
advisers, Alliance Trust has recorded a webcast and published a Pensions
Bulletin about the retirement options available in a SIPP for those nearing age
75 on its online adviser centre at www.alliancetrust.co.uk/adviser
ASPs are not
right for everyone, however, as the income available for withdrawal from an ASP
fund is not guaranteed because it will depend on how the investments chosen
within the ASP perform over time and changes to long-term interest rates. Income limits for those with an ASP fund are
recalculated annually. In addition, those
saving for retirement also need to bear in mind the costs associated with
running an ASP fund and the taxation position of any remaining ASP fund on
death.
When
approaching 75, each person will need to make a choice about the type of income
they receive from their pension. The table below shows the differences between
annuities and ASPs.
|
Annuity |
ASP |
|
|
Income payments
guaranteed for life |
Yes |
Yes, but
maximum income is recalculated annually and dependent on investment
performance and changes to long-term interest rates |
|
Ability to
provide income for spouse, civil partner on death |
Yes (optional) |
Yes
(compulsory) |
|
Ability to pass
remaining funds to charity following death |
No |
Yes |
|
Ability for
lump sum payment to be made to third party following death |
No |
Yes (but
subject to significant tax charges) |
As the
administration of ASP is more complex, especially on death, not all personal
pension and SIPP providers provide this option for members.
The
Conservative party is currently trying to amend the government’s personal
accounts legislation, to remove the obligation to buy an annuity by age 75.
Alliance Trust believes that by also avoiding punitive tax charges on death,
the government would be taking a vital step towards encouraging people to save
for retirement using these accounts.
Steve
Latto continued: “We would encourage the government
to think carefully about ways to encourage future generations to save for
retirement. While it has stated that it does not want pension funds to be used
as a mechanism to pass on assets on death, if the transfer could be made to the
pension fund of another family member this could help provide future
generations with a decent income in retirement without having to rely on the
state. It would also make saving for your own retirement a much more attractive
option, if you knew that any wealth, unused in your own lifetime, could be
transferred into the pension pot of the next generation.”
--
ends --
·
To read the full Alliance Trust
Pensions Bulletin on ‘Retirement options for SIPP members nearing age 75’
please go to www.alliancetrust.co.uk/adviser
and log in to the Additional Services Area.
Contacts
Alliance Trust Lansons
Communications Tel +44 (0)1382 306064 Tel +44 (0)20 7294
3605 / 3674 Mobile 07745 783212 Email alliancetrust@lansons.com Email jane.holligan@alliancetrust.co.uk |
Notes to
editors