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13 April 2017

Expression of wishes

What happens to any pension you may have in the event of your death is clearly a very important decision. To this end, it is vitally important that the pensions Expression Of Wishes form is completed correctly. The failure to mention certain desired beneficiaries, or if the form is not completed correctly or with inappropriate wording, it can have a significant impact of who receives your pension in the event of your death, as well as how much is received and when. It can also potentially result in significant, avoidable, unnecessary tax.

With the various changes to pension rules over the past few years, older Expression Of Wishes forms may no longer be suitable.

It would be worthwhile contacting your independent financial advisor to discuss your position.

Pension protection

An individual normally pays tax if their pension fund exceeds the lifetime allowance.

The lifetime allowance reduced to £1m on 6 April 2016. It had previously been reduced to £1.25m on 6 April 2014. However, it may be possible to protect your pension fund from the reduction. 

HMRC’s website provides a summary of the rules: www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance

It would be worth having a chat with your independent financial advisor if this topic affects you.

In –  Specie pension contributions 

There has been much press recently on the topic of tax relief granted to “in – specie” pension contributions.

This is a process whereby a “promise” is made by an individual to make a pension contribution of £x worth, which is then settled by the transfer of an asset into the ownership of a pension scheme. Common assets include shares and property. The pension scheme then claims basic rate tax relief (20%) from HMRC which is added to the pension fund, as it would do with a monetary personal pension contribution (subject to restrictions for additional rate tax payers as detailed on the attached link: www.gov.uk/tax-on-your-private-pension/annual-allowance 

Some pension scheme providers have, for the time being, stopped accepting “in – specie” pension contributions on the basis that HMRC have begun to, in some cases, question the valuation of the assets being transferred and therefore also the tax relief that was granted.

Having an independent valuation of the asset transferred is therefore more important than ever.

If you have or are due to undertake such a transaction, it would be worthwhile having a chat with your independent financial advisor.