Another positive tax change has been announced, which will benefit many pension savers.
You will be able to enjoy the freedom to pass on unused defined contribution pension to any nominated beneficiary when you die, rather than paying the onerous 55% tax charge that currently applies to pensions passed on after death.
Under the new proposals, which are set to take effect from April 2015, anyone who dies before they turn 75 will be able to pass on their remaining defined contribution pension to any nominated beneficiaries completely free of tax, whether it is in a drawdown account or untouched – provided it is paid out in lump sums or taken through a ‘flexi access drawdown account’.
Such a payment would also be exempt from inheritance tax if written as a ‘Bypass Trust’ or held for nominated beneficiaries.
The new proposals do not apply to annuities or scheme pensions.
Anyone who dies with a drawdown arrangement or with untouched pension funds once aged 75 or over will also be able to nominate a beneficiary to receive their pension. The nominated beneficiary will be able to access the pension funds flexibly, at any age, and pay tax at their marginal rate of income tax. There will also be an option to receive the pension as a lump sum payment, subject to a tax charge of 45%.
The new proposals continue a major reshaping of the retirement landscape that began in the 2014 Budget which, among other measures, removed the requirement to buy an annuity. With pensions saving clearly now a major focus for politicians and thus in a state of some flux, it is well worth considering seeking expert advice at Platinum regarding your individual circumstances.