ASPs have only been
available since 6 April 2006. Prior to then, everyone had to use
their pension savings to buy an annuity by age 75. This is
still the rule but there is now an alternative option, ASPs.
An ASP is a form of income drawdown. Instead of buying an
annuity at age 75,
an individual can continue to invest their pension savings and draw
an income from their fund within laid down limits.
The minimum that must be drawn as an income from
the fund is 55% of an amount calculated by applying the funds
available to a table produced by the Government Actuaries
Department (GAD). The maximum is 90%. The GAD table is
based on the level of single-life lifetime annuity rates for a
person of the same sex and aged 75. No allowance is made in the
annuity rate used for any level of annual pension increases.
These rates were introduced with effect from 6
April 2007, following a review of ASPs by the Government. For
the year 6 April 2006 to 5 April 2007, the rates were 0%
(minimum) and 70% (maximum).
Further information about the GAD rates is
available from the Revenue's website.
The pension year for an ASP is the 12 months from
your 75th birthday and every subsequent 12 month period.
The maximum amount must be recalculated every new
pension year. The reassessment continues to be made by reference to
an annuity at age 75, irrespective of what actual age you have
reached.
Q & A's
Your residual fund can be;
- allocated to provide any of your dependants with a pension. The
pension can be provided by means of an annuity bought from an
insurance company. Alternatively, if the dependant is under 75 when
you die, the fund can be paid into an unsecured pension arrangement
(formerly called an income withdrawal or income draw-down
arrangement) or, if the dependent is 75 or over, it can be paid to
an alternatively secured pension. If there is more than one
dependant, the fund can be divided. How pensions are provided for
each dependant may differ. Some could be supplied with annuities
while others have an alternatively secured pension(if the dependant
is 75 or over) or unsecured pension arrangement(if the dependent is
under 75).
- if there are no dependants, all or part of the funds may be
paid to a charity you nominate.
- if there are no dependants, a transfer of the residual fund may
be paid to another arrangement within the same registered pension
scheme. You must nominate the arrangement to which the transfer is
paid. If this is not done, then the scheme administrator can make
the nomination. This option was removed as an authorised
payment with effect from 6 April 2007. therefore, although
still allowable, it will attract an unauthorised payments charge of
up to 70%.
Please note that Inheritance Tax (IHT) is charged on
your death as if the value of any remaining funds were part of your
IHT chargeable estate. Funds paid to charity are excluded. If your
residual funds are used to provide pension benefits for your
spouse, civil partner or person who was financially dependent on
you at the time of your death, the tax charge will not arise until
entitlement to such benefits ceases. The responsibility
of accounting for and paying the IHT due falls on the pension
scheme administrator.
A dependant is defined as: your wife; any of your children who
have not reached age 23 or , if 23 or over, are, in the opinion of
the scheme administrator, dependent on you at the date of your
death due to their being physically or mentally impaired; a per
who, in the opinion of the scheme administrator, was financially
dependent on you at the date of your death.
Yes, you can cease your ASP at any time and buy an annuity.
Alternatively, you can continue your ASP but use part of the fund
to buy an annuity. Clearly in that situation the maximum income
that can be drawn from the ASP will have to reduce.
No, it is not an all or nothing choice. You can apply part of
your pension fund to buy an annuity and put the balance in an
ASP.
Yes, you can transfer from one ASP to another provided it is to
a new arrangement in another registered pension scheme.
