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More good news for pensions from George Osborne as he plans to abolish ‘Death Tax’


More good news for pensions from George Osborne as he plans to abolish ‘Death Tax’

Osborne: “People who have worked and saved all their lives will be able to pass on their hard earned pensions to their families tax free.”

At the latest Conservative party conference (29th September 2014) George Osborne announced changes to the lump sum death benefits tax charges.

The changes announced have yet to be made legislation and we await full details to clarify our understanding, which are expected to come into effect from 6th April 2015. We also understand the changes are only applicable to defined contributions schemes (personal pensions, SIPP’s, group pensions) that have not been used to purchase an annuity.

Main Points

Currently if a member dies before age 75 and before taking their benefits, a lump sum can be paid tax free. However, where they have taken their benefits or they die after the age of 75, a 55% tax charge would be applicable to any lump sum paid.

Proposed changes for those under age 75

For those that are under the age of 75 it will be possible to leave drawn or undrawn funds to any beneficiary tax free. This can be in the form of a lump sum or pension, where they will be able to draw tax free income as and when they need it. This should mean the remaining funds will continue to grow tax free within the pension wrapper.

Proposed changes for those over age 75

Pension savers will be able to nominate who ‘inherits’ their remaining pension fund. The beneficiary can draw an income which will be taxed at their marginal rate when taken through drawdown. Alternatively, they’ll be able to take it as a lump sum less a 45% tax charge.

 Lewis’ Analysis

We believe this is more good news for the pensions market and once again brings pension savings to the forefront of financial planning. We are keen to see if the final legislation mirrors the initial announcement and await the next step which is expected to be released in the Chancellor’s Autumn statement on 3rd December 2014.

 These changes will work particularly well with our property syndicates and the potential for tax free income for some beneficiaries.

 If you require any further information prior to the final legislation please do not hesitate to contact your usual adviser at Lewis’.


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