nEWS AND INSIGHTS

Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

How to use your pension to pass wealth to your family while avoiding Inheritance Tax

For many people, passing wealth onto family is an important part of financial planning.

Since the pension freedoms in 2015, pensions can now be easily passed onto beneficiaries and can be used to mitigate Inheritance Tax. This is because pensions generally fall outside of the estate.

Find out more about mitigating Inheritance Tax

Passing on a pension is one of the most efficient ways to mitigate Inheritance Tax

At Four Wealth Management, a Financial Adviser will recommend taking income from assets other than your pension when you are retired. This will mean that you are taking income from assets that will be included in your estate, such as an ISA. Utilising these assets first will reduce the overall value of your estate meaning less Inheritance Tax is due.

For many people, your pension should be the last asset that you use to provide income at retirement because it is not included in your estate so there is no Inheritance Tax liability. Using the income last will mean your fund stays invested longer and has more time to potentially grow meaning that you can leave more assets to your loved ones.

If your main priority is to preserve most of your pension fund to leave it to future generations then you should review your underlying pension investments with this in mind. For example, you could leave your pension invested in higher risk investments as they will have a long time to grow if you are planning on leaving the funds to your family.

A financial adviser at Four Wealth Management can recommend investments that are suitable for your needs.

Book a no-obligation meeting to discuss leaving your pension to your family

How much tax will my family pay on my pension?

There are different tax rules to how your pension funds can be passed onto your family depending on the age that you die.

If you die before age 75, your chosen beneficiaries can inherit your pension fund without tax.

If you die after the age of 75, no tax will be payable when your pension is transferred to your beneficiaries. However, any withdrawals will be taxed at your beneficiaries marginal rate of income tax.

Can I pass on my annuity income?

If you have used your pension pot to buy an annuity then your income usually stops when you die unless you have bought a joint life or guaranteed period annuity. These will continue to pay income. With a joint life policy when your spouse dies the income will stop completely and cannot be passed onto any of your other family members.

If you are looking to leave assets to your family then a financial adviser at Four Wealth Management will help you to organise your finances accordingly to maximise the amount that can be left to them.

Who can I leave my pension pot to?

You can nominate anyone as a beneficiary of your pension pot. You can also have more than one beneficiary.

It is important to note that your pension is not included in your Will. Therefore it is important that you make your wishes of who your pension should be transferred to known.

You can fill out an Expression of Wish form which your pension provider can give you. If you have multiple pension schemes with different providers, you must fill out a form with each provider. You can nominate multiple beneficiaries and also decide how much you want each beneficiary to receive.

You can change your Expression of Wish form at any time.

Find out more about leaving assets to your family

To discuss the most tax-efficient way to leave assets to your loved ones, book a no-obligation meeting with a financial adviser online now or call us on 0117 973 0500.

 

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up.  You may get back less than you invested. 

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Enquire Now

If you have any queries or would like to arrange a face to face meeting with an adviser for a no obligation review of your personal finances, simply book a call back using the form below. Alternatively, you can call us on 0117 973 0500.

The Partner together with St. James's Place Wealth Management plc are the data controllers of any personal data you provide to us. For further information on our uses of your personal data, please see the Partner's Privacy Policy or the St. James's Place Privacy Policy.

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How to use your pension to pass wealth to your family while avoiding Inheritance Tax
2021-09-13T03:14:00+01:00
FourWealth Management