ASPs in the news

Milarky

http://business.timesonline.co.uk/article/0,,16849-2270795,00.html

This made interesting reading. The gov't looks as though it has had a sudden 'change of heart' and now wants to repeal the provision allowing for extending the period of income drawdown beyond the usual cut off of 75 known as an 'alternatively secured pension' (or ASP). From the FT yesterday it was anecdotally being reported that 'many' people reaching 75 since April 6 this year have either not yet converted their pension pots to annuities or have been looking at ASP/income drawdown. Now the gov't has taken fright - recognising that income drawdown post 75 is likely to be much more popular than anniuty purchase. But to stop non-Brethen getting access to ASP they will probably have to remove the concession altogether ('Human rights Act', 'discrimination' challenges beckoning)

What is the view on this forum - should ASPs go or stay? What is your prediction - will they be retained more or less freely or will they be scrapped entirely?

margaretclare

Hi

I saved in a stakeholder from retirement income only, amassed a small pot, didn't want another annuity - I have 3 already! I dislike the rigidity, the fact that there's no elbow-room, once you've bought your annuity that's it for ever and ever. I've recently transferred my stakeholder into a SIPP just because I didn't want to be put into these kind of shackles yet again. I've just put the pot into drawdown so that I can take the 25% tax-free lump sum, but I don't want any income from the remaining 75% at present, I'd like it to continue to grow until I do need it in the future. With this set-up I can review the situation every year and I can take an annuity or drawdown income any time I like. With an annuity, as I said, there's no possibility of reviewing the situation. If I'd known before what I know now I'd never have had the annuities. When/if I reach age 75 (I'm nearly 71 now) I shall definitely prefer the option of drawdown income indefinitely rather than be tied into some insurance company's terms and conditions and having to be stuck with what they think is appropriate for me rather than what I'd prefer for myself.

Can't tell what decisions will be made elsewhere, but that's what one retiree would like. Especially as you get the 'baby-boomers' retiring (the generation after mine) they tend to be an independent-minded crowd who won't like being told what the gubbmint thinks they should do!

Margaret Clare

cheerfulcat

Milarky wrote:

This made interesting reading. The gov't looks as though it has had a sudden 'change of heart' and now wants to repeal the provision allowing for extending the period of income drawdown beyond the usual cut off of 75 known as an 'alternatively secured pension' (or ASP). [...]
What is the view on this forum - should ASPs go or stay? What is your prediction - will they be retained more or less freely or will they be scrapped entirely?

It's not a change of heart, unlike the residential property in SIPPs fiasco. The ASP provision was always intended only for those with religious objections to annuities. It has been extremely irresponsible of the financial services industry to push ASP as an alternative available to everyone - if I have known from the start that this wasn't so ( and I have, because it was made perfectly clear ) then so have they. Don't get me wrong; I don't like what this government has done and is doing to the country's pensions and I certainly don't think that annuities should be compulsory. But the ASP thing was made crystal clear at the time.

dunstonh

I dont think the financial services industry have pushed it at all. I think the whole thing has been media driven rather than industry driven.

That said, so what if it was originally intended for a specific religious group. In this world of equality, what is good for one group should be good for another and any financial adviser would be foolish not to consider a possible option available to any individual.

margaretclare

Oh dear. I hadn't realised I was in the wrong religion (I am a Methodist).

What, exactly, is the objection to annuities - apart from the ones we know about, the inflexibility etc? What is the *religious* objection, I mean?

Margaret Clare

cheerfulcat

dunstonh wrote:

I dont think the financial services industry have pushed it at all. I think the whole thing has been media driven rather than industry driven.

Nope, sorry, it was the industry. They just fed the media. Here's a press release from the Association of British Insurers
Some (mis)information from a firm of financial advisors. A specialist IFA, more misinformation. A broker, ditto.

That said, so what if it was originally intended for a specific religious group. In this world of equality, what is good for one group should be good for another and any financial adviser would be foolish not to consider a possible option available to any individual.

But it isn't open to " any individual ". I think it should be, too, but at the moment it isn't.

Margaret Clare, you need to belong to the Plymouth Brethren. It seems that they object to insurance. You can read an entertaining debate in Hansard on this very subject here ( there's more if you Google ). Take note of the date, by the way...

jem16

margaretclare wrote:

Oh dear. I hadn't realised I was in the wrong religion (I am a Methodist).

What, exactly, is the objection to annuities - apart from the ones we know about, the inflexibility etc? What is the *religious* objection, I mean?

Margaret Clare

Apparently it's because for the Brethren and others like them, betting on the date of your death — which is, in effect, what an annuity is doing — is unthinkable. That is God’s decision alone.

blackanchorage

Why is an annuity betting on the date of your death? To me it seems to be just the opposite - you get paid till you die, whenever that is. If you do income drawdown, and you live until 100, there is a chance (depending on how well your investments do) that you will run out of money; so you're betting that you don't live to 100. If you do, the state has to supplement your income after they already gave you tax breaks earlier.

Regards, Roger

margaretclare

jem16 wrote:

Apparently it's because for the Brethren and others like them, betting on the date of your death — which is, in effect, what an annuity is doing — is unthinkable. That is God’s decision alone.

Very strange. I'd never heard of this one. I thought I'd heard it all - it's wrong to gain interest on savings therefore there have to be special mortgages for certain religious groups...Methodists are against gambling per se, but I hadn't heard of 'betting on the date of your death'. You live and learn, don't you.

One of my annuities has now been running since 1989. It always pays out the same amount, a yearly sum....I said at the beginning I didn't want it, I'd like to feed it back into a pension scheme of some kind against the day when I really needed it. I couldn't do it then because it was 'unearned income' and I wasn't allowed to. Obviously it's worth less in real terms than it was then. What I should have done with it was to stick it into a savings account, but I didn't have the discipline then to do that. What I have done in fact is to pay for some 'big thing' every year with it, often some form of home improvements.

Thank goodness the other two annuities are index-linked, 3% extra every year. I still wouldn't have gone for those, if I'd learned all the things I've learned since.

Margaret Clare

cheerfulcat

Oddly enough the government itself doesn't seem to be too sure about what it's doing ( what a surprise ). Here, Ruth Kelly refers to Christian Brethren. Edit: OK, it seems to be a sub sect of the PBs. All very odd and obscure.

EdInvestor

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