Keeping Pension Wealth in the Family

Pension Death Benefits – Keeping Pension Wealth in the Family

New rules regarding flexible pensions such as SIPPs now allow pension wealth to cascade down the generations within the pension wrapper, creating a truly tax efficient wealth management and inheritance plan.

You may now nominate beneficiaries under your personal pension plan without restriction – beneficiaries no longer have to be ‘dependents’ (i.e. spouses or children dependent on parent for financial support).

When passing the fund on, if the original member dies after age 75, any withdrawals from the fund will be taxed at the beneficiaries’ marginal rate of income tax. However if death occurs before age 75, the nominated beneficiary has a pot of money they can access completely tax free.

The nominated beneficiary doesn’t have to access the fund at all, and in this way the fund can be passed on down the generations, only becoming subject to tax when a withdrawal is made. Each time the pension pot is passed down, the tax rate will be reset by the age at death of the last account holder.

N.B. this is not available under non-flexible pensions, such as defined benefit occupational pension scheme’s where you receive an income in retirement equating to a percentage of your final salary.

For further information, or to check your nomination of beneficiary under your existing plan, please make an appointment to come in for a chat.