The most recent changes to pensions, which came into force from 6 April 2015, affect the way benefits are taxed on death. These changes give you another opportunity to help your clients by explaining the new rules and how they could affect their retirement plans
New rules – new opportunitiesThe most recent changes to pensions, which came into force from 6 April 2015, affect the way benefits are taxed on death.
These changes give you another opportunity to help your clients by explaining the new rules and how they could affect their retirement plans.
Protecting your client’s investment
Many people are concerned that if they buy an annuity, they might die early, long before they get full value for their money.
A Value Protection option ensures that the remainder of any investment used to purchase a secure income will be paid to their family, should they die earlier than expected.
If they die before age 75, their beneficiary will get this payment completely tax-free. If they are 75 or older when they die, the money will be liable to a 45% tax charge, but from April 5 2016 this will be replaced by a charge based on the beneficiary’s marginal rate.
Avoiding the 45% tax trap
Drawdown arrangements have their own tax advantages. If crystallised or uncrystallised funds are held in flexi-access drawdown and the client dies before age 75, no tax is paid by the beneficiary whether the money is taken as a lump sum or drawdown pension.
Should the client die after 75, the beneficiary can take any funds as a lump sum, but will face a 45% tax charge (until 5 April 2016). However, taking the money as income (including withdrawal of the whole value as one pension income payment) will only be subject to the beneficiaries marginal rate of tax.
This means it could be advantageous for your clients to consider combining an annuity with flexi-access drawdown. Spreading their pension fund in this way offers peace of mind with flexibility for the future, and significant tax advantages
More changes, more benefits
A Guarantee Period means income will continue to be paid for a number of years selected by the client at outset, even if they die during this time. There is now no tax restriction on the length of the guarantee period and Partnership offer up to 20 years.
Also, Joint Life annuities can now be set up with anyone. It does not have to be a dependant; we will accept any nominee aged 40 or over.
At Partnership, we can not only offer flexible solutions – but typically, ones that provide a higher income too. Our underwriting expertise allows us to assess each client individually, and offer them a bespoke annuity rate based on their specific circumstances.
If you would like to get a personalised quote from Partnership, call 0845 108 0443* or email salesandcampaigns@partnership.co.uk.
*Local call rates apply. Telephone calls may be recorded for training and monitoring purposes.
Partnership is a trading style of the Partnership Group of Companies, which includes: Partnership Assurance Group plc (registered in England and Wales No. 08419490), Partnership Life Assurance Company Limited (registered in England and Wales No. 05465261), and Partnership Home Loans Limited (registered in England and Wales No. 05108846).
Partnership Life Assurance Company Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Partnership Home Loans Limited is authorised and regulated by the Financial Conduct Authority.
The registered office for these companies is 5th Floor, 110 Bishopsgate, London, EC2N 4AY.