Autumn Statement – 3rd December 2014

We expected more details regarding the facility to take unlimited amounts from a Pension Plan, announced in March 2014, would be given in the Budget speech – but nothing was forthcoming.  We understand that this matter is still under consultation and it is likely that we will receive final details late January / early February.

However, there were changes announced to Pension arrangements and these were:

55% tax charge on inherited pensions

From April 2015, beneficiaries of individuals who die under the age of 75 with remaining uncrystallised or drawdown or defined contribution pension funds, or with a joint life or guaranteed term annuity, will be able to receive any future payments from such policies tax free where no payments have been made to the beneficiary before 6 April 2015. The tax rules will also be changed to allow joint life annuities to be paid to any beneficiary.

Where the individual was over 75, the beneficiary will pay their marginal rate of Income Tax, or 45% if the funds are taken as a lump sum payment. Lump sum payments will be charged at the beneficiary’s marginal rate from 2016-17. (Finance Bill 2015) (48)

How will this affect you?

Great news if you die under the age of 75 as the tax charge of 55% will now be nil.

If you die over the age of 75, and any remaining Pension monies that you made have can be passed on to whoever at their ‘marginal rate’.

So if your children/ beneficiaries are high rate taxpayers, they will pay tax at either 40% or 45% if they take monies from the relevant inherited policy.

If this could be the case for you, then why not leave your estate to your children – but your Pension Plan to your grandchildren?

Everyone has a ‘Personal Allowance’ of £10,600 (for tax years 2015/16), including children, and if the Pension was passed directly to them they could take monies, with no tax payable up to this amount.  Perhaps this could fund University Fees; deposits for a property, whatever.

Successfully Financial Planning is based on taking advantage of the relevant allowances, etc.

We’ll keep you updated as soon as we any further news on proposed changes.

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