• Contact us
  • About us
  • Digital edition
  • Online archive
Sunday, June 1, 2025
Social icon element need JNews Essential plugin to be activated.
Cumberland and Westmorland Herald
  • News
    142178

    Multiple fire crews tackle roof fire in Crosby Ravensworth

    142165

    Free domestic abuse support drop-in service launches in Penrith

    142123

    Penrith bar relaunched with vibrant events planned

    142119

    Penrith Beacon access closed after vandalism

    142011

    Fire crews spend six hours tackling blaze at timber firm’s headquarters

    141750

    £15 million luxury care home plans for Penrith

    141382

    Changes to business rates

    141490

    Tesco Express opens doors in Penrith

    141441

    Nursing award for Penrith’s Fay Dudson

  • Sport
    142126

    Penrith teen crowned British vault champion

    141451

    Penrith gymnasts represent North of England in finals

    141095

    New boss revealed for Penrith AFC

    141045

    Penrith Panthers celebrate winning season

    139837

    Darren Edmondson leaves Penrith AFC

    137888

    Lucy plays key role in county T20 triumph

    136783

    Gold for Keith in annual festival of orienteering

    136081

    Cumberland and Westmorland wrestlers head to European championships

    133324

    Kirkby Stephen Hockey Club win league title

  • Obituaries
  • Nostalgia
  • Online archive
  • Buy Photos
  • Buy your paper
  • North Lakes Living
No Result
View All Result
Cumberland and Westmorland Herald
  • News
    142178

    Multiple fire crews tackle roof fire in Crosby Ravensworth

    142165

    Free domestic abuse support drop-in service launches in Penrith

    142123

    Penrith bar relaunched with vibrant events planned

    142119

    Penrith Beacon access closed after vandalism

    142011

    Fire crews spend six hours tackling blaze at timber firm’s headquarters

    141750

    £15 million luxury care home plans for Penrith

    141382

    Changes to business rates

    141490

    Tesco Express opens doors in Penrith

    141441

    Nursing award for Penrith’s Fay Dudson

  • Sport
    142126

    Penrith teen crowned British vault champion

    141451

    Penrith gymnasts represent North of England in finals

    141095

    New boss revealed for Penrith AFC

    141045

    Penrith Panthers celebrate winning season

    139837

    Darren Edmondson leaves Penrith AFC

    137888

    Lucy plays key role in county T20 triumph

    136783

    Gold for Keith in annual festival of orienteering

    136081

    Cumberland and Westmorland wrestlers head to European championships

    133324

    Kirkby Stephen Hockey Club win league title

  • Obituaries
  • Nostalgia
  • Online archive
  • Buy Photos
  • Buy your paper
  • North Lakes Living
No Result
View All Result
Cumberland and Westmorland Herald
No Result
View All Result
Home Expert advice
This article appears as part of a paid partnership with Armstrong Watson

How can you ensure your beneficiaries receive the maximum benefit from your pension?

By Sarah Tallentire, financial planning consultant, Armstrong Watson Financial Planning

by CWH
13 May 2024
in Expert advice, Sponsored
A A
Share on FacebookShare on Twitter
Sarah Tallentire

Pensions are attractive to many due to their tax-efficient nature.

Tax relief is applied upon contributions, turning, for example, £80 into £100 in an instant, furthermore, higher and additional rate taxpayers can claim further tax savings in line with their marginal rates.

Once invested, the growth in the pension will be free from personal income and Capital Gains Tax, and when the time comes to withdraw funds you can take up to 25% of the holding free from any tax.

Another attractive tax quality that pensions provide is that upon death, funds held in a pension are not included in valuing your estate.

This means that when calculating Inheritance Tax (IHT), if this applies to your estate, your pension funds aren’t included and therefore won’t be subject to a 40% tax.

However, as with many aspects of financial planning, it isn’t always this straightforward as the following example highlights.

A married couple with children own their £350,000 home outright, have a second property worth £150,0000, and savings and investments worth a further £300,000. This brings their combined estate value to £800,000.

Each individual has a nil rate band, of £325,000, which represents the value one’s estate can be before becoming liable for IHT.

Furthermore, those who own their own property and leave it to their direct descendants, may benefit from the residence nil rate band (RNRB) of up to £175,000 per person.

This is the case for our example clients, who have wills and plan to leave their entire estate to their children. They therefore have combined allowances of £1m, and of course, their estate falls well within these allowances.

In addition to these aforementioned assets, they each hold defined contribution pensions which are both valued at £400,000.

They’ve been diligent and completed nomination forms so that the upon their passing, the surviving spouse would receive the deceased’s pension. All so far, so good.

However, an issue with significant IHT consequences could arise if they’ve failed to check as to how the death benefits are paid out.

Pension schemes can do this in a couple of different ways – paid out as a lump sum or by way of a nominee flexi-access drawdown.

Whilst legislation allows for either method, some providers and pension schemes do not.

This means that they only have the ability to pay the proceeds out by way of a lump sum. This tends to be the case with those schemes that were in place prior to Pension Freedoms legislation being introduced in 2015.

If we look back at our couple, following the death of the first spouse, their pension pays out a lump sum equal to the value of the pension holding, tax-free, to the surviving partner.

The deceased made no use of their IHT allowances, which are inherited by the survivor and therefore their £1m IHT allowance is maintained.

However, the survivor now has:

House £350,000
Rental property£150,000
Savings/investments£700,00
TOTAL£1,200,000

On the death of the second partner this then means 40% tax is due on the value of holdings above £1m and therefore the estate on the second death will face an £80,000 IHT bill (40% of the £200,000 over the £1m threshold).

Like a lot of IHT, this could have been avoided had the couple reviewed the death benefits on their pension schemes and taken action to address this concern prior to the death of the first partner.

To understand the impact your death would have on the value of your pensions and to review how the proceeds would be passed on, please get in touch.

Call 01768 222030 or email help@armstrongwatson.co.uk

No Result
View All Result
Cumberland and Westmorland Herald Logo

33 Middlegate
Penrith
Cumbria
CA11 7SY

Phone: 01768 862313
Email: news@cwherald.com

Registered in England as Barrnon Media Limited. No: 12475190
VAT registration number: 343486488

Explore

  • News
  • Sport
  • Farming
  • Property
  • Obituaries
  • Nostalgia
  • Your view

Useful links

  • Contact us
  • Photosales
  • Online archive
  • Buy your paper
  • Digital edition
  • North Lakes Living
  • Advertise
  • About us

Follow us on

© Barrnon Media Limited 2020

Terms & Conditions / Privacy Policy / Cookie Policy

This website and its associated newspaper are members of the Independent Press Standards Organisation
IPSO Logo
Review Your Cart
0
Discount
Add Coupon Code
Subtotal
Total Installment Payments
Bundle Discount
Checkout

 
0
No Result
View All Result
  • Home
  • News
  • Sport
  • Obituaries
  • Nostalgia
  • Online archive
  • more
    • North Lakes Living
    • Buy Photos
    • Buy your paper
    • About us
    • Contact us

© 2020 Cumberland & Westmorland Herald