Pension
freedom
A New Dawn for Pensions
Pension Freedoms have become
something of a pensions stampede.
Never before has there been so much
interest from so many people in their
pensions. If the Government’s aim was
to engage ordinary citizens with their
retirement planning, then they have done
a good job. They have also succeeded
in increasing tax inflows for the HMRC.
Do not be deceived it is the Treasury
which stands to be a big winner from the
new pension freedom rules when people
decide to withdraw all their pension
funds in one go.
As advisers we have experienced
unprecedented interest from clients new
and old about what their pensions could
mean for them. For some it feels a bit
like Antiques Roadshow when that old
pension from the last century suddenly
seems to be worth something – and
can even be converted into cash. For
others it’s a realisation that investing in
a pension really could make a difference
to their family’s future.
Death and Taxes
One of the most radical changes and
one of particular interest to wealthier
clients is the change to the taxation of
death benefits on tax. It has created
opportunities for families to cascade
wealth through the family. Pension funds
can generally be passed to beneficiaries
outside of the estate and therefore free
of Inheritance Tax. Pre April, that fund
having passed unscathed through the
inheritance tax hurdle would have then
been walloped with a 55% tax hit.
Under the new rules, if the pension
owner dies before they are 75, the fund
can pass to beneficiaries completely
free of tax. Whilst this will be a bonus
for some beneficiaries, its impact may
not be that great simply because most
retirees (about 75%