New rules due in April will bring radical changes to how pensions can be distributed upon death and savers must prepare carefully to ensure their money is passed on to whom they wish and in the most tax-efficient way possible, says investment platform provider AJ Bell.
“A wider range of people will be able to receive death benefits as a pension rather than having to take a lump sum, as of 6 April, and as a result it is vitally important that you leave a correctly completed nomination form” says Mike Morrison, Head of Platform Marketing, AJ Bell. “Non-dependants will only have the option of receiving death benefits as a pension if they have been nominated by you, or in very limited circumstances your pension provider. If you think your beneficiaries will be better off receiving death benefits as a pension it is essential that you nominate them. If they are not nominated and can only receive death benefits as a lump sum the tax impact could be huge.”
Notes for Editors
- AJ Bell has prepared a number of case studies and articles relating to specific issues raised by the pension and death tax rule changes. These are available on request.
- Since the Budget of March 2014, the Government has outlined a series of pension reforms which will come into force from 6 April 2015.
- From that date, wider family and friends will be able to receive death benefits as a pension rather than having to take a lump sum, something previously restricted to just spouses and dependants.
- If you die before your seventy-fifth birthday, in most cases your pension will be handed over to your beneficiaries tax free, while if you die after that point benefits will be taxed according to the recipients' own tax rate.