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Death benefits.

Our self invested pension plans aren't just there to help clients plan for their future. They are also designed to provide support for their families if they die.


Providing for others.

In the event of a client’s death, the way their fund is treated will depend upon their age.

The following death benefit options apply:

 

Member’s age at date of death

Options at date of death

Taxation 

Pre age 75

 

Payments to the member’s nominated beneficiary or beneficiaries

FREE of tax whether taken as a lump sum or income*. 

Age 75 and over 

Payments to the member’s nominated beneficiary or beneficiaries 






Payment to a charity

Subject to income tax at the beneficiary’s marginal rate of tax whether taken as income or a    lump sum.

If the beneciary is not an individual, eg a trust has been nominated, benefits will be paid as a lump sum taxed at 45%.

Not taxed provided there are no surviving dependants and the charity has been nominated.

*Provided the lump sum payment or designation of funds for income is made within 2 years of the member's death. Any lump sum payments made after the 2 year period will be taxed at the recipient's marginal rate.

Lifetime Allowance
The lifetime allowance (LTA) still applies to uncrystallised funds on death pre-age 75, so a LTA charge will apply if benefits exceed the deceased’s personal lifetime allowance. Any pension funds that a person inherits (please see 'cascading benefits' below, will not count towards their own LTA.

Nominating beneficiaries
Nominations are generally made under an 'expression of wishes' form. The nominations are not binding but the trustees and/or scheme administrator will usually take them into account.

Where the member has not made a nomination but has dependant(s), then the dependent(s) will benefit from any outsatnding funds in the pension. However, where the member has not made a nomination and has no dependant(s), the scheme administrator can nominate any individual to receive the pension benefits. Payments to individuals will be taxed in the same way as to those nominated.

As a result of this flexibility, it is even more important that clients' nominations are up-to-date.

Cascading benefits
In the event that nominated beneficiaries die whilst receiving benefits payable from the fund (following the member's death) it may be possible for the benefits to continue to cascade to additional beneficiaries until the fund has been liquidated. The tax treatments of cascading benefits will depend upon the age at death of the pension holder. This gives the potential for clients to pass pension funds down through generations with the funds remaining invested in a tax privileged environment.

In the event of a minor (someone under 18 years old) being nominated as a beneficiary, Denton & Co Trustees Limited along with the guardian of the minor will act as the trustees until the child comes of age. Any income generated by the Plan would be paid to the child tax free. Unless the guardian is an independent financial adviser, investment decisions would be delegated to an IFA.

01483 521521