This page contains a Flash digital edition of a book.
pension savings. Successive tax grabs by politicians of various hue evidenced that those with pension savings (particularly those with large amounts) were perceived to be ‘sitting ducks’. Thankfully, times seem to be changing.

New rules to be implemented next year look set to make pensions an effective vehicle for family financial planning that will enable one generation to support the next. As I pointed out in my article in the April

2014 edition of essence, the 2014 Budget introduced greater freedom at the point of retirement for those with pension savings. Until now there have been strict rules regarding the rate at which money could be drawn from a pension fund, ostensibly to reduce the risk of the fund running out. However, from 6 April 2015 it will be possible to draw the entire fund in one go, if needed. As before, up to 25% of the fund can be drawn as a tax-free lump sum while the remainder will be treated as taxable income in the year of payment. To recap, this was fantastic news (particularly for those with smaller pension pots) because it removed the necessity to purchase an annuity. Whilst annuities provide a guaranteed amount of income for life, the current environment of very low interest rates renders them poor value. However, the prospect of this new

flexibility introduced a conflict with Government’s aim to encourage long term saving. A hangover from Gordon Brown’s stint as Chancellor was that for a pensioner dying after attaining age 75, any pension income could only be paid to a financial dependant. Income distributions, if continued, would be taxed at the dependant’s marginal income tax

DeathBenefits W

Simon Lewis is pleasantly surprised by the proposal to liberalise rules regarding inherited pension funds and in particular, to remove the punitive 55% tax charge on death….

hat a difference a year makes. I must admit that I was beginning to lose faith in the efficacy of

rate. However, any lump sum paid to the dependant or any other beneficiary would be subject to a 55% tax charge. This charge has always been deemed unnecessarily punitive and unfair. Therefore, once the new flexibility came into force, pensioners would be incentivised to withdraw their pension fund quickly because their beneficiaries would be penalised if they did not. Clearly this had to change and the Chancellor’s Budget Statement undertook to revisit this issue. Having done so, he has gone further then expected. The Chancellor has now announced

that with effect from 6 April 2015 new rules will apply. As with the current regime, the rules applied will depend upon the age of the pensioner at the time of death, with age 75 being the point of change. However, whether the pension fund is crystallised (pension benefits have commenced) will no longer be relevant. In essence, for deaths under the age

of 75 the pension fund could pass as a tax-free lump sum to any beneficiary or beneficiaries. This applies even if the fund is crystallised. Furthermore, the fund could be transferred to any beneficiary (as distinct from dependants only) and any income subsequently drawn by them would be paid tax-free. The pension fund could remain invested and continue to grow without tax deduction during this period. For deaths post age 75 the pension fund

could pass as a lump sum to any beneficiary or beneficiaries. The lump sum would, however, be subject to 45% tax if paid in 2015/16, changing to the beneficiaries’ marginal rate from 2016/17 onwards. Alternatively, the fund could pass to any beneficiary (as distinct from dependants only) and be used to pay an income, which would be taxable.

Importantly, if a beneficiary inherits a pension it will not count towards their own Lifetime Allowance. This will prevent those who have made provision for their retirement being penalised as a result. Going forward, it will be even more

important for those with pension funds to make their wishes clear by completing nomination forms to guide pension scheme trustees. For those who wish to see their pension funds divided between two or more beneficiaries it will be important to check that the structure of their arrangements will accommodate this. Further detail regarding the new rules will

be provided in the Chancellor’s Autumn Statement. If you would like advice about how the new rules might affect you, please contact us.

• essence info

Simon Lewis is writing on behalf of Partridge Muir & Warren Ltd (PMW), Chartered Financial Planners. The Company has specialised in providing wealth management solutions to private clients for 45 years. Simon is an independent financial adviser, chartered financial planner and chartered fellow of the Chartered Institute for Securities and Investment. The opinions outlined in this article are those of the writer and should not be construed as individual advice. To find out more about financial advice and investment options please contact Simon at Partridge Muir & Warren Ltd. Partridge Muir & Warren Ltd is authorised and regulated by the Financial Conduct Authority. Telephone: 020 8339 9900 Email: Website: 55

Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84