UK - In the pre-budget report released today, chancellor Gordon Brown has announced the April increase in the basic state pension will be in line with September's Retail Price Index (RPI) of 3.6%, taking the basic state pension to £87.30 per week.
In addition, the pre-budget report announced the government's intention to tighten the regulation surrounding Alternatively Secured Pensions (ASPs), stating: "It was never the intention that ASPs would become a mechanism to avoid compulsory annuitisation, or to leave a tax-favoured lump sum that could then be passed on."
The government has proposed the introduction of changes to the tax regime for ASPs at Finance Bill 2007, with effect from 6 April 2007. The changes would require ASP holders to withdraw a minimum level of income each year from an ASP fund. Also, the facility to transfer funds on death as a lump sum to the pension funds of other members in the scheme will be removed from the authorised payment rules: attracting instead an unauthorised payments charge.
However, the government issued the warning that should these proposals "prove unworkable", or if there was "continued evidence of the use of pensions tax relief to provide capital sums throughout retirement", it would consider removing access to ASPs altogether.
Likewise, the government has announced it will work with the pensions industry to "explore" ways to stop life insurance policies that provide lump sum death benefits alone being offered as personal pension arrangements eligible for pensions tax relief.
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