TPAS - The Pensions Advisory Service

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 & As

What happens to my fund when I die?

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.

What is the definition of a dependant ?

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.

If I enter into an ASP, can I at a later date buy an annuity?

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.

I am approaching age 75: do I have to use all my pension funds to buy an annuity or to set up an ASP?

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.

If I become unhappy with the ASP I am in, can I transfer to another one?

Yes, you can transfer from one ASP to another provided it is to a new arrangement in another registered pension scheme.