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Do YOU ​​know what happens to your pension after death?

Economy:
Do YOU ​​know what happens to your pension after death?

CONFUSION is rife over what happens to pensions after death, with many people who inherit money set for a nasty shock in the form of a stinging tax bill, according to exclusive research for Express.co.uk.

Shocking research has found that one in three Britons have no idea what happens to their hard earned savings after they die, despite paying into their pension pot for years.
Around half of people think that pensions can simply be autmatically passed on to children or surviving spouses, according to research carried out by pension provider Aegon.
But in reality tax can eat away huge portions of retirement cash that is left to dependents.
The amount of money that can be claimed by HMRC depends upon when a person dies and the type of pension they held.
Those who die before the age of 75 can pass pensions on to who they wish tax free.

Do YOU ​​know what happens to your pension after death?

But a pensioner's pot can be liable to tax at a rate of up to 55 per cent, depending on the type of pension, if they are older than that.
Lump sum savings in workplace schemes, such as defined contribution or defined benefit, are subject to tax at a flat-rate of 45 per cent.
On the other hand retirement cash that has been placed into an annuity or drawdown scheme is subject to income tax.
Savers are now being urged to think much more carefully about the tax implications when deciding which pension schemes to invest in.

Kate Smith, head of pensions at Aegon, said: "Considering what your loved ones will be left with once you pass away is a somewhat morbid topic, but one it's vital we all consider.
"With pension freedoms having opened up the number of choices available to us all, in some ways it's now more complex to choose how to access your pension and consider what will be best for your surviving spouse and children."
She added: "With people having more choice than ever before, pension providers should be responding and making sure that those people making decisions about how they will fund their retirement can find and access suitable products for their needs."

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01 April 2016, 22:00