At the risk of sounding political, and let’s be honest, tax policy always is, this blog by Andy Bell takes a critical look at the government’s proposed changes to pension taxation on death. But this isn’t just about pointing fingers. Yes, there’s justifiable frustration at the way these plans have been introduced, but more importantly, there’s a need for practical, fair solutions that work for clients, advisers, and the wider financial ecosystem.
We’re highlighting the issue not to make a political statement, but to raise awareness and contribute to a better way forward. The financial services industry has already suggested workable alternatives. The question is: will policymakers listen?
To discover the details, simply follow the image link.
Andrew Tully (Nucleus) has also analysed how potentially complex this new process might be, which may trigger you to think:
- “Do I want to administer estates and pensions themselves and
- Do I want to try and follow this process for multiple pensions (which many people hold)?
Overall, it remains a horribly complex situation, Andrew says, with many pitfalls for the unwary, such as:
- Pension schemes will need to provide a date-of-death valuation within four weeks of being notified of death.
- Personal representatives (PRs) will need to obtain that from each scheme as well as dealing with all non-pension assets.
- Once each scheme has worked through its discretionary disposal position and decided on the beneficiaries, they will need to confirm that to the PRs. Who will then need to apportion the nil-rate band between each scheme paying to a non-exempt beneficiary, and the non-pension assets.
- The PRs will then pay the resulting IHT bill to HMRC.
- They will then need to tell the pension beneficiary and the Pension Scheme Administrator (PSA) the amount of IHT due in respect of the pension benefits.
- If the beneficiary believes it’s the best option, they can ask the PSA to pay the IHT bill on their behalf direct to HMRC, as long as the tax due is £4,000 or more.
- If less than £4,000, the scheme could choose to pay but isn’t required to do so. HMRC would then refund any overpaid IHT to the PRs.
- The pension beneficiary could choose not to ask the scheme to pay the IHT. In that case – and depending on whether the pension beneficiary is different to the beneficiary of the non-pension assets – the PRs may need to approach and ask the pension beneficiary to reimburse them as they haven’t paid a fair share of the IHT due.”
If you’re saving for retirement or thinking about how to pass on your wealth, Andy Bell’s article (image link) is well worth a read.
And if you’re unsure how these changes might affect you, we’re here to help you make sense of it all and adjust your plans (if required) with confidence. You can contact us via the form below or calling on 01825 76 33 66.
-
This article is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
-
Levels and bases of, and reliefs from, taxation are subject to change, and their value will depend upon personal circumstances. Taxation and pension legislation may change in the future.
-
The Financial Conduct Authority (FCA) does not regulate Inheritance Tax Planning.