1. The first reason obviously is that you will have to pay tax on what you take out over and above the first 25%.
2. The other reason is that money in a pension fund can pass to a beneficiary, and, indeed, down a line of beneficiaries – all free of Inheritance Tax. And once a beneficiary receives entitlement to the inherited pension fund, the money they take out is ALL tax-free. (Note: if the person with the pension fund dies aged over 75, the rules are slightly different; contact us if you need more information on this.)
So, if you have other alternatives to provide you with the income you need, you may wish to consider preserving the pension fund as an efficient means of providing an inheritance.
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