PENSIONS USED AS LIFE ASSURANCE OR INHERITANCE PLANNING

The new Flexi Pension Plan rules have opened up new opportunities for pension plans to help with life assurance and passing the pension down to beneficiaries in a tax-efficient way. If you have a personal pension plan (these rules generally do not apply to Final Salary/Defined Benefit Pensions), you can nominate anyone you want to be the beneficiary. If you die before age 75, the value in the pension can pass to the beneficiary with no tax at all (!). If you die after age 75, it still passes to the beneficiary but would be taxed at the beneficiary’s tax rate. The beneficiary can also opt to set up his own flexi-pension with the monies and would be able to take money out when he chose, or even leave it to a beneficiary of their choosing.

WORKPLACE PENSIONS/AUTO-ENROLMENT

Those with a pension in their workplace will have an enforced increase to their pension contributions

from the 6th of April. Instead of both the individual and the company putting 1% of their salary into

the employee’s pension, it increases to 3% by the employee and a minimum of 2% by the employer. Someone earning £20,000 could find his monthly contribution going up from £14.00 or so per month to £40.00 per month. While that may not be a welcome extra cost, do remember that the increase also means more from the employer and, taking into account the additional amount the Government has to put in, that £40.00 per month taken from the employee would end up with them getting £83.00 in their pension – over 100% return on their money. Not bad!!