With the autumn budget announcements this week, the big news was that there is no big news on further pension scheme legislation changes following the March budget surprises.
Pensions in payment death benefits are now clear. The 55% tax charge on benefits has gone! Pensions can now pass on without this particular charge; however some complexity (and tax) still remains.
Namely, where an individual is over age 75 when they die the beneficiary will pay marginal rate income tax on any income payments, or 45% for lump sum benefits. If death occurs before age 75 no tax is payable by the beneficiary regardless of whether this is taken as a lump sum or income.
This tax relaxation has now also been extended to joint life annuities. This change perhaps redresses the balance for those who value the certainty and guarantees that an annuity can provide. For some using a combination of retirement income solutions (annuities and drawing directly from the pension pot) could provide the income flexibility they require.
Whilst pensions provided no further shocks there was an announcement that there will be an additional ISA allowance for married and civil partners. Previously where one spouse pre-deceased the other the ISA assets were passed to the survivor; but the tax advantaged ISA wrapper was lost. Now in the year of death the surviving partner has an ISA contribution allowance equal to the value of deceased spouse’s ISA holdings plus their own usual annual allowance (£15,000 in the current tax year).
Is this a sign perhaps of equalisation between the ISA and pensions regimes? Of course, tax relief on pension contributions still remains a major attraction for savers, particularly given the more relaxed stance on benefits on retirement.
The Autumn Statement has also confirmed many of the things announced back in March including more flexible access to pension benefits and reduced contribution limits (£10,000 per annum) for most once pension benefits are accessed.
Given this brave new world it is even more imperative that you get expert and independent advice when planning for your retirement, Swindells Financial Planning should be your first port of call.
