Many clients seem to believe that they have a pension fund, that all the cash and investments belong to them 100%, and that if they die the pension will pass to their partner or children. I beg to differ…
When I see a client I who wants advice on “their” pension the first thing I tell them is that it isn’t, – that normally gets their attention.
So whose pension is it?
As everyone knows, under normal circumstances you are entitled to 25% of the pension fund tax free, but that is only a quarter of the pension fund value, – what about the other 75%?
With current interest rates (and annuity rates) being exceptionally low a lot of people approaching retirement are taking the tax free cash out of the pension but delaying taking any income from pension.
Many people are unaware that in doing so they are “crystallising” benefits and although they are not taking any income, they are “technically” regarded as if they are. Should you die any remaining monies may be subject to a 55% tax charge on death!
To put this into perspective, let’s say you worked very hard and made sacrifices over the years and have ended up with a pension fund worth £ 400,000.
You decide to take out tax free cash of £100,000 and not to take income for now.
Two years later, you die unexpectedly.
Out of the remaining fund of £300,000, the government takes £165,000. The remaining £135,000 is available for your family…
Would you be happy with this situation?
If not what are you planning to do about it?
There are two possibilities :-
- you need to find the secret of immortality.
- take steps to ensure that in the event of your premature death your family does not have to suffer financial hardship.
What you may not want to do, is to do nothing and allow the government to take most of your residual pension. After all doesn’t the government get quite enough of our money?
Ray Best can help you protect your financial future. To find out more, simply click here!