private pension deferral

ps2659

My Uncle has a private pension he is near 65 and not sure what to do, he does not need the money someone told him if he does not draw it until after 75 there will be no tax to pay and if he dies can leave it to his wife or estate without any inheritance tax, does this make sense?
Thanks for any replies

xylophone

What kind of pension is this?

MyOnlyPost

Different pensions have different rules, this is from the fact sheet supplied with mine and I think is pretty standard

If you die before 75

• All options will usually be paid tax free
• If you die before taking benefits from your SIPP with total pensions above your remaining lifetime
allowance (£1 million in 2016/17) any excess may be subject to a lifetime allowance charge of up to 55%.

If you die after reaching 75
• Any income option chosen by your beneficiary will be taxable at their marginal rate

jamesd

The type of pension matters. If it is defined benefit like final or average salary it might not increase after the scheme's normal retirement age and it might have no death benefits.

If it's defined contribution it may well have a high guaranteed annuity rate that's worth taking. Otherwise state pension deferral would probably pay more per Pound spent on buying income.

Any income taken by him will be taxable at any age. If he doesn't take any income then no tax is due.

A person can continue paying into pensions until they reach 75. Depending on the amounts involved it might be better to take something from the pension and do that.

ps2659

xylophone wrote: »

What kind of pension is this?

My Uncles pension is Defined Contribution, he has just phoned me to tell me but he does not have a clue what to do but just heard from a friend that if he does not draw it until after 75 there will be no tax to pay and if he dies can leave it to his wife or estate without any inheritance tax. Any help appreciated.

xylophone

https://www.pensionwise.gov.uk/leave-pot-untouched

https://www.gov.uk/tax-on-pension-death-benefits

Your uncle could book an an appointment with Pensionwise for some initial information.

He could book an appointment with an Independent Financial Adviser for tailored, paid for advice.

http://societyoflaterlifeadvisers.co.uk/

jamesd

The reason that there is no inheritance tax on pensions is that they are not part of the estate. He shouldn't try to get the death benefits paid to his estate. Instead he should get the pension firm's expression of wishes form and use that to say who should get it. The will doesn't say who gets pension money because the pension isn't part of the estate, the expression of wishes does the job instead.