ASP instead of having to buy a pension annuity
Here we look at how alternatively secured pension’s (ASP’s) are evolving, especially with a lot of talk about the need to abolish having to buy a pension annuity by age 75.
At at age 75, ASP requires a minimum income of between 65% and 90% of Government Actuary’s Department (GAD) rates, with GAD rates being restricted to those applicable for a person aged 75 even as the client gets older. 75 could be seen as a bit random nowadays when we are being encouraged to work longer and where some ability to have flexiblility with pensions exists.
For a husband with a wife who is considerably younger, or vice versa, the death of one party in ASP could see the dependant in unsecured pension (USP) and therefore with the option of a death benefit of the fund value less 35% tax. It is also important to remember that a pension annuity purchase is always an option.
If a pension annuity is seen as longevity insurance, the annuity rates get better the older that you buy, so if that annuity is not purchased until the client is in his eighties then an enhanced annuity rate might be available. It might even be possible to buy an annuity with a guarantee period built in which could guarantee a stream of income back to the deceased’s estate.
Retirement planning is going to become increasingly important. There are more and more options available to the retiree and product innovation is likely to become more important. We have already witnessed the development of third way ‘variable annuity’ products.
