Newsflash - Proposed Death Benefit Pension Changes!
Pension Changes!
The Chancellor of the Exchequer, Mr George Osborne has brought forward (as it was going to be in the Autumn Statement) the announcement of the long awaited changes to death benefits to today!
The announcement will benefit those individuals who have crystallised their pension benefits or are aged over 75 and have Money Purchase (i.e. Defined Contribution) arrangements, such as Personal Pensions, Self Invested Personal Pensions or who are in Drawdown.
Where an individual dies after 5th April 2015 (or it would appear after 29th September 2014 and no pension death benefits are taken until after also the 5th April 2015), the new rules will apply.
Should the deceased individual have been under 75 and have a defined contribution pension(s), no tax charge will apply if benefits are taken as either a lump sum or taken as income through a flexi access drawdown account (the new name for Flexible Drawdown), which means crystallised funds will now be taxed the same as un-crystallised funds.
Those aged 75 or over when they die will be able to pass their defined contribution pension(s) to any beneficiary who will then be able to draw down on it at their own marginal rate of income tax.
Beneficiaries will also have the option of receiving the pension as a lump sum payment, subject to a tax charge of 45% (if the deceased was over 75). The Government intends to also make lump-sum payments subject to tax at the marginal rate (not a flat rate charge of 45%) – which will be consulted on.
It does however appear that those individuals with Defined Benefit arrangements or where the individual has (or in the future they purchase) an annuity, will not benefit from the change in legislation.
So lots of changes which will benefit some individuals, but for those that remember a certain Mr Osborne in 2012 increased the Crystallised Pension Death Benefit Lump Sum Tax charge from 35% to 55%, - he gives with one hand, having taken with the other and so perhaps next year’s Electioneering has just started early?
To benefit from these changes, reviewing what pension benefits you have may well be crucial and so please contact us for a free and without obligation, initial meeting.
For a review or even just a friendly discussion, please contact us on 0118 928 8065 or e-mail us on . We look forward to hearing from you.