The changes introduced in April 2006 gave the opportunity to avoid annuity purchase and provide more flexible death benefits than those available under annuity purchase for people over the age of 75.

The Government has stated that these changes were brought in for people with religious objections to buying an annuity, since some people feel that they are gambling on other people dying. The main group was the Plymouth Brethren.

It was never the Government's stated intention that the death benefits from an alternatively secured pension would find mass appeal, but  changes were introduced to reduce the attractiveness of these death benefits. The death benefits are:

• If you pass on the fund value to family members (other than your spouse or financial dependents) this will incur a tax charge of at least 70%
• You can leave the fund to charity without any tax charges
• If you're married when your die your spouse can use the fund without the 70% tax charge
• If you have a financial dependent when you die they can use the fund without a 70% tax charge

If you're in ASP and ultimately want the fund value to pass to family members (other than your spouse or financial dependents), then this is still possible. It would only be possible to pass it onto their pension funds, and it would incur a tax rate of 70% plus possible Inheritance Tax, which would bring the total amount of tax up to around 82%.

As you can see the punitive tax regime only comes into effect if the funds are to be redistributed beyond the spouse and beyond financial dependents. If they're are used by a spouse then the tax charges do not apply until the subsequent death.

So ASP still offers a number of advantages for husband and wife situations:

• If you're in ASP and married a joint life annuity can be expensive, i.e. it could reduce the income you receive, and prove pointless if you spouse dies before you.
• ASP allows the income to be taken from the fund, and in the event of your death your spouse could access the fund. 
• If your spouse is under age 75 when you die the fund then becomes unsecured pension, which has more flexible death benefits
• If your spouse is over age 75 when you die, then the fund become alternatively secured pension
• Your spouse could buy an annuity with the proceeds in the event of your death at any stage

If death benefits are one of your concerns, and passing on some of the value of the pension to your children, then it is worth considering an annuity with a 10 year guarantee, since if it is a single life, level annuity it is probable that it will provide an income greater to that available from an Alternatively Secured Pension. If you are a basic rate tax payer, and this income keeps you within the basic rate tax limit, it will only incur tax at 22%. Whereas the funds passed on under alternatively secured pension could incur Inheritance Tax at a much higher rate. 

There is also a provider which offers an annuity with "ring fenced" death benefits, which is available to annuitants up to age 75, i.e. a return of fund based on the value of the individuals annuity fund. This offers a number of advantages over an alternatively secured pension, as the fund

If you have a question about alternatively secured pension, or want to discuss the options available then contact us.

Don't take any chances with your pension, your retirement will depend upon it, talk to an independent pension specialist now