For those old enough to remember The Clash, Mick Jones sung this song just prior to his expulsion from the group.
Which, in my vicarious way, leads me to the new rules that affect death benefits for UK defined contribution schemes and personal pensions.
I previously blogged about the 55% tax myth being busted. Well, it certainly has been busted now.
From next year, anyone that has a money purchase pension ( personal fund ) will be able to pass the whole fund tax free to their families. Well, as long as they are under 75.
For those over 75, the family/beneficiaries have a choice-
- Access to the full fund, minus 45% tax or,
- Continuing income from the fund at the beneficiaries personal tax rate.
So, for someone with a large pension fund in their early 70s, there is some thinking to be done.
I cannot help thinking that someone that becomes infirm by the age of 74, and wants to leave their family as large a legacy as possible, may wonder if it is best to ‘’check out’’ before their next birthday.
More of concern, at the back of my mind, is the demanding family that have an interest in Mum or Dad not making it to their 75th birthday.
While this new relaxation of the tax rules will be broadly welcomed, I think further consideration needs to be given to the plight of the 74 year old with a pension fund who wants to look after the family after death.
In addition, as one actuary succinctly put it, while referring to the new rules, ‘ This gives annuities a real kick in the goolies’ too. More on that another time.