View more on these topics

LV= launches IHT campaign on guaranteed annuities

LV= has launched a campaign to highlight the risk of paying unnecessary inheritance tax on guaranteed annuities.

LV= says that many annuities include five or 10 year income guarantees to try and protect their value in case the holder dies early.

Despite any payments made under these guarantees being taxed as income they are often subject to a further charge to IHT.

The friendly society is urging financial advisers to check who the annuity provider will make the income payments to.

Unless the payments are made at the annuity provider’s discretion, it is likely that the value of the guarantee payments will fall under the annuitant’s estate for inheritance tax purposes.

Using the example of a male aged 65 buying an annuity now with a 10 year guarantee and receiving an income of around £7,000 per annum, the IHT payable could be £8,780 if the annuitant died after five years and the payments were not made at the provider’s discretion.

Head of annuities Matt Trott says: “Protecting income in retirement is hugely important, and in the case of someone with a guaranteed annuity dying before the guarantee ends, extra inheritance tax charges could be an nasty surprise that the family of the annuitant do not need.

“Financial advisers can ensure their client’s dependants’ are not faced with a necessary tax bill, by checking who the annuity provider will make the income payable to. Unless these payments are made at the annuity provider’s discretion it is extremely likely that the value of the guarantee payments will fall under the client’s estate for IHT.”


Recommended

5

It will never happen to me

Research by Scottish Provident has highlighted once again the need to end the ‘it won’t happen to me’ culture gripping the UK when it comes to their protection needs.

6

Turner says SEP fee increases are a “one-off”

FSA chairman Adair Turner says that FSA fee increases are a one-off and the industry will not face further rises for the supervisory enhancement program in the future.

Skandia merges away Aggressive fund

Skandia Investment Management has merged its Aggressive fund into the recently-launched Global Dynamic Equity fund.Aggressive fund investors voted to merge their £35m assets into the global vehicle which has a more flexible and wider remit and is able to use Ucits III powers.The Aggressive mandate was split between a range of fund groups, each running […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment