View more on these topics

Govt scraps 45% tax on dependants drawdown

2014-Budget-George-Osborne-Walking-700.jpg

A rule that forced dependants to take inherited pension funds as a lump sum at 23 has been scrapped by the Government.

The Budget documents reveal technical changes that mean dependants’ flexi-access drawdown accounts get converted into nominees’ accounts.

As a result they will no longer have to take any remaining funds as a lump sum and suffer a 45 per cent tax hit.

Nominees and adult dependants can withdraw savings as quickly or slowly as they like but until now child dependants, where the deceased died over age 75, they had to take the entire pension pot by 23.

Withdrawals are taxed at the dependant’s marginal rate of income tax, meaning they could pay more tax than is necessary.

Under the new death benefit rules, if the death occurs before the age of 75 savings are passed on tax free.

Retirement Advantage pensions technical director Andrew Tully says: “This change allows them to keep money in the pension wrapper until they actually need it, and helps people cascade pension wealth down through the generations in a tax-efficient way.”

AJ Bell head of technical resources Gareth James says: “It is helpful that the Government has corrected one of the anomalies that arose from the introduction of the changes to the taxation of death benefits.

“This will be helpful where children receive death benefits as it won’t encourage accelerated withdrawal from the pension scheme before age 23.”

Recommended

2014-Budget-George-Osborne-Walking-700.jpg

Govt plans workplace advice tax boost

The Government will extend the tax reliefs offered on employer-arranged advice as part of a series of measures to boost take-up, Chancellor George Osborne has announced. Currently, companies can pay up to £150 per employee per year towards the cost of pension advice before they are subject to a benefit-in-kind tax charge. In February Money […]

Trevor-Greetham-700x450.jpg

Royal London launches multi-asset range

Royal London Asset Management has launched a new range of six multi-asset funds. The range of multi-asset funds will be managed by RLAM’s six-people team headed by Trevor Greetham, who joined the firm earlier in 2015 in a newly created role. The risk-targeted funds range from cautious, which is a UK-focused fixed income fund including […]

Morten-Nilsson-On-London-Street-700.jpg
1

Now: Pensions to top-up pots of savers missing out on tax relief

  Auto-enrolment scheme Now: Pensions is to top-up up savings of its non-taxpaying customers who are missing out on tax relief because of an administrative quirk. The provider – like most occupational and trust-based schemes – uses a net pay model of distributing tax relief on pension contributions. However, because the starting rate of income […]

Spring has sprung

Well, it’s been lovely to see a little bit of sunshine, even if it was only a brief appearance. I live in Scotland so, believe me, it was very brief.  Of course, with even the tiniest hint of spring, thoughts turn to the inevitable clearout that must take place.  And that got me to thinking […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment