Skandia have warned that assets held in alternatively secured pensions (ASPs) risk a double tax charge of 61%. They believe that this will happen when a dependent that has benefited from an alternatively secured pension fund dies before the age of 75, and the remaining funds are paid out as a lump sum to others.
An inheritance tax charge of 40% will be applied to the fund, and then the pension scheme tax charges of 35% will be applied to the remainder, giving a total tax charge of 61%. Skandia believe that this adds an extra layer of complexity to ASP arrangements, and that advisers should make sure that clients understand what could happen.
Our view
This may be true but is 61% better than a 100% charge? If you have an annuity, i.e. secure your pension with guaranteed income and then die, ultimately you lose all your money i.e. 100%. This is a windfall for guess who? Yes, that's right, Insurance Companies!
We believe the new rules are an excellent platform for more affluent people who can still draw income form their fund and yet be able to pass some of it to their heirs on death. This is not necessarily the case with annuities.
At retirement and inheritance tax are extremely complex areas. Book at FREE call back from the Online IFA of the Year 2004,2005 and 2006!