Pensions death tax axe impact limited, Sipp firm analysis shows

Analysis of the latest mortality data has shown how limited the impact of scrapping the pensions death tax will be, according to a Sipp provider. Chancellor George Osborne said at the Conservative party conference last week that the 55% tax will be scrapped from April. There will be no longer be a charge on pension funds for beneficiaries if the person who dies is 75 or under.But for those over 75 years old at the time of death, a marginal rate of tax will be paid.The Treasury said around 320,000 people who retire each year with defined contribution pension savings will no longer be hit by the charge and can pass on their funds to any nominated beneficiary when they die.Suffolk Life has today warned that the numbers who would benefit are relatively low and raised questions over the different tax treatment for people aged 75 or above.Suffolk Life highlighted Office of National Statistics data on registrations of deaths in 2013 across England and Wales. {desktop}{/desktop}{mobile}{/mobile} It showed that for men: · 111,120 males died before reaching age 75· Out of these, 27,787 did not reach age 55 (the age at which pension benefits can normally be taken)· 168,051 males died aged 75 or older· More males – 119,479 – died after reaching age 81 than died before age 75 – 111,120 The same analysis for women: · 75,977 females died before reaching age 75· Out of these, 17,378 did not reach age 55 (the age at which pension benefits can normally be taken)· 221,309 females died aged 75 or older· More females – 80,502 – died after reaching age 90 than died before age 75 – 75,977 Greg Kingston, head of marketing and proposition at Suffolk Life said the rule change would be welcome for investors and their families and will open up "significant new planning opportunities for them and their advisers".But he said the statistics "clearly show the limitations of this move".He said: "In 2013 141,932 people died before the age of 75, having reached at least 55, the age from which they could access their pension."However, in the same year 389,360 people died aged 75 or over. The beneficiaries of the latter, older demographic would face different tax treatment on their inherited pension funds – taxed at their marginal rate on their withdrawals."He said: "With a sharp increase in the use of flexi-access drawdown expected post April 2015, advisers will need to prepare different tax planning scenarios to cater for deaths both before and after age 75. Given that the retirement plans of the next generation will be affected either way, advisers have a great opportunity for holistic tax planning across generations of family members."

Pensions death tax axe impact limited, Sipp firm analysis shows

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