SSAS SMALL SELF ADMINISTERED PENSION SCHEME

Transcription

1 SSAS SMALL SELF ADMINISTERED PENSION SCHEME DEATH BENEFIT OPTIONS

2 Introduction This is a basic guide to the options available on death of a member of an InvestAcc SSAS. It is not intended to replace the need to obtain financial advice, which will be particularly important when making choices of this nature. InvestAcc Pension Administration Limited is not authorised to give financial advice. Death Benefit Options You can nominate who should receive benefits in the event of your death, and they may choose: A lump sum, or A beneficiary s Flexi Access Drawdown pension, or A beneficiary s pension annuity purchased on the open market. Lump sums can be paid to anyone, including trustees of an appropriate trust. If you have no dependants when you die, a taxfree lump sum can be paid to a charity of your choice. Beneficiaries pensions can be paid to anyone. Tax on lump sum benefits Death Before age 75 If you die before age 75 then your uncrystallised funds, up to the level of your unused Lifetime Allowance, can be paid tax free within 2 years of death. The amount of the lump sum that exceeds the unused Lifetime Allowance is taxed at 55%. The Lifetime Allowance is 1.25 Million in 2015/16, although you may have a higher allowance than this if you have a valid protection certificate from HMRC. Also, the Lifetime Allowance may change in the future. Any crystallised funds can be paid tax free within 2 years of death, otherwise they will be taxed at 45%. Death from age 75 onwards If you die having reached your 75th birthday, lump sum benefits will be taxed at 45% in the 2015/16 tax year, although the Government has said that it intends to change this in future years so that lump sums after age 75 are taxed in the hands of the beneficiaries at their marginal rate of income tax. No inheritance tax is normally payable on lump sum death benefits. Tax on beneficiary s pension income (Flexi Access Drawdown or Annuity) If you die before age 75 then income payments to your beneficiaries will be tax free. If you die having reached your 75th birthday then these payments will be subject to income tax at your beneficiaries marginal rate. What is a beneficiary s Flexi Access Drawdown pension? Beneficiaries choosing to have an income from the deceased s pension fund, do this via a Flexi Access Drawdown account. The beneficiary can choose to withdraw any amount of income, at any time. Flexi Access Drawdown pension is provided subject to the SSAS Scheme Rules. Liquidity - planning ahead Depending on the form of the benefits to be paid following death of the member, it may be necessary to sell investments so that the proceeds can be used to make payments to beneficiaries, and to settle any tax liability for the pension scheme. In the short term, a beneficiary s drawdown pension may avoid the need to sell assets, so long as there is an income stream or capital readily available to provide the required benefits. However, if other benefit options are chosen then assets may need to be sold. 1 / 5

3 Schemes with more than one member It is a pre-requisite that all decisions must be made by the unanimous agreement of the managing trustees (also known as the member trustees). With a SSAS, investments are held on a pooled basis, and this means that it is not usually possible to identify investments specifically held for the provision of benefits for one particular member. Benefits paid following the death of a member would be paid based on their share of the value of the scheme as a whole. For schemes with more than one member, with insufficient liquid funds, the remaining managing trustees will therefore need to come to a unanimous decision as to which investments may need to be sold in order to pay benefits. Notifying the SSAS Scheme Administrator Members can nominate beneficiaries at any time. Nominations can be changed as often as you require to reflect your circumstances. A Death Benefit Nomination form is available on our website In the event of a member s death, the beneficiaries should write to: InvestAcc Pension Administration Limited, Minerva House, Port Road Business Park, Carlisle, CA2 7AF attaching the following: Certified copy of the Death Certificate Confirmation of the death benefit option required Certified copy of the spouse s birth certificate (if applicable) Beneficiary s verification of address and identity Beneficiary s bank account details Certified copy of marriage certificate (if applicable) Additionally we recommend you contact your financial adviser. 2 / 5

4 At a glance guide to SSAS Death Benefits The table below may assist in understanding the options available, and the tax treatment at the time of publication. Note that Uncrystallised Funds are those from which the member had not started to withdraw benefits (i.e. pre-retirement). Crystallised Funds are those which had been used to pay some benefits (either as a Tax Free Lump Sum and / or Drawdown Pension). It is possible that there may be a combination of Crystallised and Uncrystallised funds within a SSAS at the point of death. Uncrystallised funds Crystallised funds Death occurs before age 75 If paid with 2 years, lump sum paid tax free to any beneficiary, up to the available Lifetime Allowance. Lump sums paid after 2 years will be subject to special 45% tax charge. or annuity) for any beneficiary, tax free. If paid within 2 years, lump sum paid tax free to any beneficiary. Lump sums paid after 2 years will be subject to special 45% tax charge. or annuity) for any beneficiary, tax free. Death occurs from age 75 onwards Lump sum paid less 45% charge (in the 2015/16 tax year). In future years the government intends the tax to be paid by the beneficiaries, at their marginal rate of income tax. or annuity) for any beneficiary, subject to income tax at beneficiaries marginal rate. Lump sum paid less 45% charge (in the 2015/16 tax year). In future years the government intends the tax to be paid by the beneficiaries, at their marginal rate of income tax. or annuity) for any beneficiary, subject to income tax at beneficiaries marginal rate. 3 / 5

5 Death Benefit Option Request To be completed by the beneficiaries following death of the pension scheme member. Option 1 - a beneficiaries Flexi Access Drawdown Pension Option 2 - a lump sum death benefit Option 3 - a beneficiaries annuity with an external annuity provider I confirm I am beneficiary under the following SSAS, and my choice is as follows: Proportion requested: Tax treatment where the fund was held by someone that has died before reaching age 75: Tax treatment where the fund was held by someone that has died on or after age 75: Option 1 - a beneficiaries Flexi Access Drawdown Pension % withdrawals will be tax free withdrawals will be subject to income tax at the beneficiaries marginal rate Option 2 - a lump sum death benefit % tax free (any amount of uncrystallised funds exceeding the unused Lifetime Allowance will be taxed at 55%) 45% tax in year 2015/16, or likely to be subject to income tax at the beneficiaries marginal rate in future years Option 3 - a beneficiaries annuity with an external annuity provider % payments will be tax free payments will be subject to income tax at the beneficiaries marginal rate Please provide the following documentation: Certified copy of the death certificate Certified copy of the spouse s birth certificate (if applicable) Certified copy of marriage certificate (if applicable) Beneficiaries verification of address and identity Benefit payment form in respect of option 1 Beneficiary account details in respect of option 2 Transfer Out form in respect of option 3 Scheme Name Deceased Member Full Name Full Name (Beneficiary) Beneficiary Account Name Beneficiary Account Number Beneficiary Sort Code Signature (Beneficiary) Date 4 / 5

6 InvestAcc Pension Administration Limited is authorised and regulated by the Financial Conduct Authority. InvestAcc Pension Administration Limited is registered in England and Wales, Company number InvestAcc Pension Trustees Limited is registered in England and Wales, Company number / 5

7 Minerva House Port Road Business Park Carlisle Cumbria CA2 7AF t: f: e: lnvestacc Pension Administration Limited is authorised and regulated by the Financial Conduct Authority. lnvestacc Pension Administration Limited is registered in England and Wales. Company number lnvestacc Pension Trustees Limited is registered in England and Wales, Company number Version 1.2 (April 2015)