In its attempt to simplify pensions, the Inland Revenue has proposed certain changes to the way death benefits are treated under pension fund withdrawal or drawdown contracts.
Currently, the full value of the member's fund on death can be released, subject to a tax charge. However, the new Inland Revenue proposals state that in certain circumstances providers could keep the balance of any good investment performance. This means that the whole fund would not be returned to the policyholder's spouse or estate.
Both of the providers Aegon and Standard Life have rejected the proposals, feeling it would not be right to keep hold of some of the fund in these circumstances.
There is also controversy regarding the date for the simplified pension proposals to be implemented. Standard Life believes April 2004 would be suitable, whereas others feel April 2005 or 2006 would be more realistic.
Our View:
As we have already seen, there is likely to be some real opposition to this proposal. Whether or not the proposal will be implemented is not yet known.
Learn more about your options at retirement and pension fund withdrawal, sometimes known as income drawdown in the Pensions Adviser.com.