Pension legislation is set to
change in April 2015; people will have the freedom to take as much pension
income, taxed at their marginal rate, as they wish.
The Government, last week,
announced they will abolish the pension’s death tax charge.
What are the current rules?
If a person were to die
before age 75, their defined contribution (DC) pension can be passed on
tax-free to their beneficiaries as long as they have not drawn any money from
it. If they have, the residual pension
will be taxed at 55% before it is passed on.
If over 75, whether in
drawdown or not, the pension will be taxed at 55% unless passed to a spouse or
dependant under the age of 23.
What will change?
Under the age of 75, the
pension will be passed on tax-free, whether untouched or in drawdown.
The person receiving the pension
will pay no tax on the money they withdraw from that pension, whether it is
taken as a single lump sum, or accessed through drawdown.
If over 75, their pension
will be passed on to a beneficiary who will be able to drawdown the inherited
pension 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 you have any queries about
your retirement & Estate planning, please call us on 01932 830664
to arrange an initial meeting, held at our cost,
with one of our qualified Financial Advisers at Ward Williams Financial Services Ltd.
Source: HM
Treasury, gov.uk website, 29 September 2014
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