By Neville Pereira, Lubbock Fine Wealth Management LLP
Thanks to new, flexible rules announced by The Chancellor last September, pensions can now be passed on free of tax.
In order for this to happen, ‘Expression of Wish’ forms need to be completed and passed to pension trustees. This is a more flexible method of passing on pensions than via a will or trust.
The refreshingly simple rules are as follows:
- If a person dies under age 75, no tax will be payable whether a beneficiary takes income or realises the fund as a lump sum.
- If a person dies over age 75, the whole amount can be withdrawn as a lump sum or withdrawn over time, but tax at the marginal rate will be payable.
The expression of wish form must be sent to the pension scheme’s trustees rather than being written through a will. This provides the added advantage that it will be much easier and cheaper to amend the form than it usually is to change a will or a trust.
Expression of wish forms should be regularly reviewed to keep them in line with your requirements. Ideally, this should be done annually and certainly when your circumstances, or those of your nominated beneficiaries, change.
Rather than choosing one or more individuals to benefit, it is possible to nominate a trust, therefore putting control of your pension in the hands of your trustees. However, this option will involve legal advice and therefore incur costs, so you need to be sure of the advantages this may offer in your own circumstances. A trust may be advisable where there are concerns about passing funds on directly and allows your nominated individual complete control.
Thanks to these new rules, it is increasingly likely that more people will pass on their pensions through generations.
As always, getting the right advice at the earliest stage is key. For further information on this or anything else to do with pensions or financial planning, please do email me.