How can a transfer help me pass my pension to my beneficiaries?

I like the idea of being able to leave my unspent pension to my son and two daughters and my five grandchildren but I’m not sure what I need to do. How does this work in practice?

Question asked by Felix Beacham
Are You Pension Happy?
Call us on 02084327334
I know how much my pension is worth
I know how much my pension costs
I have clear financial goals for my retirement

Answered by Neil Adams

Your pension: your biggest asset and your loved ones

The new pension freedoms that came into force in April of 2015 introduced a number of important new ways for savers to access their money purchase pension savings. Importantly, the new rules also abolished the previous 55% ‘death tax’ that attached to pension savings.

Current pension freedom rules

Under the new regime, pension assets can now be passed to your beneficiaries free of inheritance tax and, for those who die before age 75, free of any income tax liability for the recipients. This is a major boon for those who have saved carefully over their working lives and want to be able to leave their pension wealth to their loved ones.

Under the current rules, assuming you die before age 75, all your pension assets can be passed to your beneficiaries free of tax.

Your beneficiaries can choose to continue drawdown – a process called nominee drawdown – and enjoy the income tax free or they can purchase an annuity, the income from which will also be free of tax. If you die after age 75, your beneficiaries will be liable to income tax at their marginal rate on anything you might leave them.

This will include tax on any income they might receive if they choose to continue with drawdown or on the income from any annuity they might purchase with the funds you pass to them. This is still a significant improvement on the previous rules.

What about a final salary pension?

The problem is that, in the case of final salary scheme arrangements, when you and your spouse die, the pension dies with you – regardless of how long you may have been receiving the benefits.

This means that a transfer from a final salary to a money purchase scheme enables you to take advantage of the new pension freedoms and to create a pension ‘pot’ that can not only provide you with a source of income in retirement but which can also be passed to your beneficiaries.

Even so, it’s important to appreciate what you’ll be giving up in return so you’ll need to seek professional advice to work out whether a pension transfer is right for you.

final salary transfers
 
pensions and inheritance
 
money purchase transfers
 
abolition of death tax
 
pension freedoms and transfers
 
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
Start your journey today...
  Find out how a Drewberry financial adviser can help you reach your destination by making the most of your finances.
Call us on 

Frequently Asked Pensions Advice Questions

 
Is there a particular age I can take money out of my personal pension? Is it fixed at state retirement...
 
I have received some pension documents saying that I have a protected rights pension, what is this and...
 
I have started drawing my pension but with the new pension freedom rules I can see me wanting to top...
 
I’m a 50-year-old woman. There seem to have been so many changes to the state pension age recently...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Matthew Draper
11/07/2018

Excellent service at convenient times of the day specified by me. All product options were clearly outlined and I am very pleased.

Paul Devine
10/07/2018

First class service. Helped me through the process from start to finish. Egle and Francis were very professional and talked me though all my options. Once the policies were set up, the after care after was also first class. Highly recommend. 5 stars all day long.

Josip Marjanovich
03/07/2018

Victoria was very helpful about selection of suitable insurance. She always answered all questions in a timely manner.

We are rated 4.9/5 based on 1512 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.93 / 5 Average
652 Reviews
Verified Buyer
Overall Rating
The whole process was a pleasure. Drewberry we're easy to deal with, polite, knowledgeable and helpful
Verified Buyer
Overall Rating
Very good, clear service would recommend to friends and family
Anon
Overall Rating
Sam Carr provided an efficient and professional service.
Verified Buyer
Overall Rating
Sam Carr provided a professional but enthusiastic service and helped make the whole process very straight forward. Goodness knows I have been through enough application forms recently. My insurance product was never going to be easy to find and I had been rejected on a number of other occasions through others ironically due to well managed common health conditions. I identified Drewberry in a last and disappointing trawl on th web to find someone that actually wanted to take on a difficult case like me. Some brokers wouldn't even consider me. When we applied for my first choice product Sam wasn't at all deterred by the long wait for my GP report or the final rejection that came back from the insurer, sadly I have become used to it. Within a day he had lined up the second choice and to my surprise he had hit the nail on the head and introduced me to the correct insurer and terms for my needs whilst nogotiating an excellent premium. I am extremely satisfied with what Sam has achieved for me and I would have no hesitation in recommending either him or Drewberry to friends, family and and business contacts. In the future, Drewberry will be my first point of contact. Many thanks!
Kym
Overall Rating
Tailored to my need and the staff gave very good service