Waveney McKenna

As pension legislation develops we are keen to ensure that you are kept informed of the benefits or problems such changes represent.

Pension simplification was introduced in April 2006 and the hope at the time was that pensions would become more straightforward and more flexible. It was envisaged that the ability for pension funds to accrue to other family members to preserve the fund values for a future generation would be available (as would the inclusion of residential property as an allowable asset).

Unfortunately pension legislation did not become more straightforward, residential property was not allowed and whilst legislation was effected to allow some of a pension to be passed as a lump sum to children the effective tax charge introduced was up to 82% of the fund unless a donation to charity is considered. A new Government may well look to make the system fairer, although going forward tax receipts will have to rise to help repay the National Debt as this may not be a priority.

Presently there are two main forms of pensions, Small Self Administered Schemes and Personal Pensions (which can also incorporate self investment via SIPPs). Both have their advantages and disadvantages; however, Axa has now launched a Family Trust with the objective of enhancing flexibility in the provision of retirement benefits.

A family pension trust allows either family members or those with common objectives to achieve the following:-

• Distribute growth between members, for example an individual with a pension value approaching the lifetime allowance could allocate growth disproportionately to a spouse who may have a smaller pension and be a basic rate taxpayer in retirement.

• Allocate growth to children; this can be useful to pass some of the asset for the benefit of another generation.

• Access a scheme pension from age 75, this is different to an alternatively secured pension; the income from age 75 is calculated actuarially by reference to your life expectancy and may be reviewed, this can allow a higher income to be paid in some cases.

• You can include a 10 year guaranteed payment period which in most cases should not count towards inheritance tax – widow’s benefits can also be provided.

• On death the fund can be left to another member with an effective tax charge of 73%, alternatively you can leave the fund to a non-connected individual (a connected individual is essentially a family member) and there may then be no tax charge.

If you feel that the ability to reallocate growth or that the scheme pension post age 75 could be of benefit then do call Ian Burrows on 01733 425818.