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
Need Pension Advice?
Call us on 02084327333
First Name
Phone
Email

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

 
Give that ISAs offer tax-free savings, am I not better investing my money into one of these rather than...
 
Am I still able to pay into a pension if I am already retired? Are there still tax benefits of doing...
 
Am I still able to pay into a pension if I am already retired? Are there still tax benefits of doing...
 
I have a couple of company pensions from previous employers but I’m not sure how well they are...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Kevin Paul
05/09/2017

Excellent service renewing our medical insurance, professional advice, good rates found and excellent professional after service, highly recommended.

Max Edgar
09/09/2017

Nadeem was brilliant. He was very patient and worked very well with me to come up with the best solution possible for my budget. Perfect solution. Thank you very much.

Aidan Smyth
11/09/2017

Dealt with me promptly and provided me with the most cost-effective option consistent with my requirements. Very pleased and thank you.

We are rated 4.9/5 based on 1129 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.93 / 5 Average
1,222 Reviews
A
Overall Rating
Really, really helpful! Stopped me from signing up with an unhelpful company, and did basically all of the legwork for me in signing up with the right one. I can't have been the most helpful client as I'm 19 and only just started looking into it last week, but he took all the questions in stride! Put up with me turning to ask my dad questions every 2 minutes as well. I was helped by 2 workers; Sam and Nick. Thank you very much to both!
L Finch
Overall Rating
Good communication and follow ups. Friendly. A thorough research for my insurance needs.
M
Overall Rating

Sam Barr-Worsfold was very helpful and provided excellent customer service. Sam discovered I was paying too much premium for my current cover. Sam recommended and helped moved to a new cover with lower premium that provided the level of cover (terms required stated in the provider's policy) I wanted. I recommend highly recommend Sam and Drewberry Insurance. Thank you Sam.
Anonymous
Overall Rating
Thorough, knowledgeable and great communication
Anonymous
Overall Rating
Went through each policy in detail and made sure I was getting the correct one for me