15th April 2015
FundsNetwork™: Don’t kill the goose - IHT planning & pensions
There’s little doubt that recent legislative changes have laid a couple of golden eggs from money purchase pensions. First, the ability to access funds in retirement with almost unfettered flexibility. Secondly, upon which I shall concentrate, greater flexibility for death benefits coupled with removal of some draconian tax charges.
Hitherto, only dependents (in essence, surviving spouse, children under 23 or others financially dependent on the member) could ‘inherit’ a pension with all other payments having to be by way of lump sum. Now pretty much anyone can ‘inherit’ the member’s fund as a drawdown pension, or an annuity or a lump sum. Furthermore an inherited drawdown pension can be passed on again on the inheritor’s death.
Whereas under the previous regime an immediate 55% death tax charge applied to any crystallised funds and all funds from age 75, the tax reins have been similarly loosened. Now, where death occurs before age 75, all death benefits, in whatever form, will be tax free. For deaths from age 75, there is tax but as opposed to an immediate 55% charge, tax will apply only when the beneficiary receives the money either in lump sum or pension form and in most cases the tax-bill will be much less than previously.
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