The Government will halt the misuse of a pensions opt-out granted a religious minority
It seemed like a good idea at the time and hindsight has done nothing to change that. Indeed, the Government’s suggestion that people could, because of their religious convictions, opt out of being forced to buy an annuity with their pension savings was so good that some of the perhaps less religiously inclined have jumped on the bandwagon.
The Government, possibly horrified at its own largesse, has confirmed that it will close the loophole; pension providers, very much less horrified, say that it’s too late for that.
The Plymouth Brethren, who had argued for the change, are merely grateful that they can protect themselves for retirement without facing moral and religious dilemmas. 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.
Thus the Government, under its A-day reforms in April, enabled the creation of the “alternatively secured pension (ASP)” for people with private pensions who reach the age of 75 and do not want to take out an annuity. It allows them to keep their fund invested and to draw income from it. Being forced to buy an income for life has become increasingly unpopular because of plunging annuity rates. Furthermore, the pension fund can be transferred on death to other family members by way of a family self-invested personal pension.
It was a measure meant purely for some religiously devout groups, but the wealthy have also seen the advantages — so much so that Ed Balls, Economic Secretary to the Treasury, told MPs recently that the Government would move to stamp on any use of ASPs as a loophole for the rich.
“It was always our intention,” he said, “that the rules would apply in the specific and narrow case of individuals with such principled religious objections, such as the Christian Brethren.”
The intention was that these would provide for an alternative way of securing an income in retirement, “but not to allow that to become a way in which a small and wealthy minority could benefit substantially from tax advantages to the cost of taxpayers overall.
“We shall not allow those concessions to be taken up more broadly to get round the annuity rules. This is not a mainstream product and it must not become a tax avoidance measure.”
The Treasury seems ready to act. In correspondence dating from May seen by The Times, Mr Balls said: “It has become apparent . . . that some individuals and their advisers are intending to use the ASP provisions more widely. In order to prevent this, we are . . . examining how best to restrict ASPs to their original limited purpose.”
The apparent U-turn has brought an angry response from pension experts. Tom McPhail, of Hargreaves Lansdown, the independent financial adviser, said: “This is no way to formulate pensions policy. I think the ultimate conclusion of this is the Government will pull the plug on alternatively secured pensions altogether. They can’t control it, they can’t police it and they will recognise the futility of running a pensions policy based on people’s religious beliefs.”
Iain Oliver, head of pensions at Norwich Union, the insurance group, questioned the legality of the Government’s position. “We have customers in ASP, as do several other providers, and we are not checking whether they are in the Plymouth Brethren or not and I suspect it is not legally sensible for us to do so.
“You cannot simply not provide someone with a product simply because they don’t have certain religious beliefs. It doesn’t sound as if it would stack up in a court of law to me.”
Sidebar: Founded in Ireland, they went in search of a strict and simple life
By Ruth Gledhill, Religion Correspondent
The skill of Plymouth Brethren theologians in teaching the Biblical doctrine of dispensationalism may have enabled them to convince the Government of the righteousness of their pleas.
The Brethren, a small group whose influence has long outweiged their number, argued successfully that they have a moral objection to annuity purchase because the buyer can profit from the death of others. A consequence of this could be that almost anyone, armed with a sufficient knowledge of the Bible and an understanding of this doctrine of dispensationalism could now claim to be a member of the Brethren and avoid having to purchase an annuity.
The Brethren, who are private, disciplined and live a strict and simple life, were founded in the 1820s. Members wanted to return to a life lived according to Biblical principles.
The movement began as what today would be described as a “house church”, meeting in Dublin. An influential early teacher was John Nelson Darby, a Church of Ireland minister. He was invited to Plymouth in 1832 to start a meeting and it was there the growth was most rapid, with 1,200 people by 1845. Growth continued until the middle of the last century, but numbers have declined since.
Members of the strictest Brethren sect, the Exclusive Brethren, will rarely be encountered by people outside it. Children are taught at home, a strictly modest dress code is followed and the adult males will work for companies operating within or close to the community.