Check your pension scheme.
Have you nominated a beneficiary for your pension scheme?
Tuesday 5 April, 2016
Simon Armstrong, Financial Adviser, at Lonsdale Wealth Management, St Albans said: ‘It is now more important than ever given the more favourable tax treatment available that individuals nominate a beneficiary for their pension schemes. When we offer financial advice we are reminding all our clients to double check they have nominated beneficiaries, as we want them to be able to pass on any unused pension entitlement.’
Since April 6th 2015 and the introduction of the new pension legislation individuals have the opportunity to nominate a beneficiary when they die, and pass on any unused defined contribution pension scheme to them which is no longer subject to a 55% tax charge.
According to www.gov.uk 320,000 people currently retire every year with a defined contribution pension scheme who would benefit from this policy change.
Anyone with uncrystallised pension funds or a drawdown arrangement can nominate a beneficiary for their pension funds when they die. If the person dies before aged 75 they will be able to leave this pension to someone as a lump sum free of tax. No tax will be paid by the beneficiary when they withdraw it.
For individuals who die after aged 75 they can also nominate a beneficiary who can access the pension funds, and they will pay tax on the pension at their marginal rate of income tax. If the beneficiary receives the pension as a lump sum payment a 45% tax charge would be payable.
Simon Armstrong is a Financial Adviser who works in St Albans and offers financial advice to clients within Hertfordshire.
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