New Rules From 6 April 2011
From 6 April 2011, the rule forcing annuity purchase by age 75
is to be abolished, although the legislation has not yet been
passed. As a consequence, the requirement for ASPs ended.
It is not possible to start a new ASP on or after 6 April
2011. Any ASPs in place before 6 April 2011 must end by the
first annual review date thereafter. The policyholder can use
the remaining ASP fund to draw an annuity or convert the ASP into a Income
Drawdown plan (click on the links for information about
annuities and Income Drawdown).
ASPs
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
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.
