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 even after a scheme member has passed away.
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:
*Provided the lump sum payment or designation of funds for income is made within two 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. In addition 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 member's personal lifetime allowance. Any pension funds that a person inherits (please see 'cascading benefits' below), will not count towards their own LTA.
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.
Pensions can only be paid to individuals who are the member's dependants or had been nominated by the member. Where the member has not made a nomination and has no dependant(s), the Scheme Administrator can make nominations. It is, therefore, even more important that clients' nominations are up-to-date.
In the event that nominated beneficiaries die whilst receiving benefits payable from the fund (following the member's death) it is possible for the benefits to continue to cascade to their beneficiaries and so on, until the fund has been liquidated. The tax treatment of cascading benefits will depend upon the age at death of the pension holder and then the subsequent age at death of the nominee and successors.
This allows clients to pass pension funds down through generations with the funds remaining invested in a tax privileged environment.
Whatever your retirement needs, one of our experts will be happy to discuss how we can help you achieve your goals.