Drawdown and inheritance

spakkaman

I have a final salary scheme pension paying me in 40% tax territory.
I am paying into a personal pension - I am aiming for a pot of more than £250K by 60 - 62yrs old around which time I will take tax free lump sum and then go into drawdown. I am avoiding crystallising before I have to as there are clear death benefits in waiting.
My concern centres upon my wife who will be entitled to 50% of my FS pension and has a fair few ISA's which is just as well as she has no meaningful pension of her own.
I just want to check that I am right to plough ahead with my tax efficient pension contributions over the next few years into my PP - i am looking to come close to maxing out on my LTA. I want to be sure that she will be able to benefit from my drawdown funds without heavy tax penalty on my death. I have researched a bit but and its not clear to me. Am I right in thinking that as a 'dependent' she will get full access to my drawdown funds and will be able to choose to continue DD or opt for annuity (I think there's a lump sum option but that isnt a priority)?.
For my kids, who are over 23 and no longer 'dependents' - if I were in drawdown and my wife and I were to die they would access the funds minus 55% tax with no other tax to pay. Have I got this right??
Thanks as always for responses.

bigadaj

Your interpretation seems about right, your final salary pension will mean that you'd qualify for flexible drawdown when you draw it.

Your wife wouldn't appear to be using her personal allowance so it could well be worth her starting a small pension, as you can get tax relief on this with no earnings on £3660 gross. Also she could claim to be self employed and pay NI to secure at least a part pension, dependent on her record, or maybe improve the pension she's entitled to, also by buying years possibly?

atush

As your Spouse, she will get 100% of your DD funds IF (and only if) they are left in DD for her pension in her own name.

and yes, if your adult children inherited the pot I believe they would have to take a LS with a 55% reduction (but AFAIK it would be outside your estate for IHT).

zagfles

atush wrote: »

As your Spouse, she will get 100% of your DD funds IF (and only if) they are left in DD for her pension in her own name.

Or she could convert to an annuity AIUI.

sandsy

Just be aware of the lifetime allowance if you wait too long before crystallising.

atush

zagfles wrote: »

Or she could convert to an annuity AIUI.

True but unlike if the OP took out an annuity himself, the pot is 100% inheritable for her if it stays as a pension in some form

Andy_L

If your final salary pension will take you into higher rate tax then the tax advantages of the pension are marginal and you may be better of with an ISA instead

atush

Not if the income remains undrawn? So it can be inherited?

kidmugsy

spakkaman wrote: »

a measly joint life annuity where you get 50% of not an awful lot.

Why would you choose 50% rather than 100%?