Autumn Budget 2014

Earlier this month, The Chancellor of the Exchequer, George Osborne, delivered the 2014 Autumn Statement.

We have summarised some of the important highlights below which we feel may affect our clients.

ISAs

From 3 December 2014, if an Individual Savings Account (ISA) saver in a marriage or civil partnership dies, their spouse or civil partner will inherit their ISA tax advantages. ISA assets currently lose their ISA tax wrapper on the death of an individual and can only be reinvested into ISAs up to the annual subscription limit. This new measure will allow spouses or civil partners to invest into their own ISAs beyond their normal subscription limit from April 2015. The additional allowance will equal the ISA value held by the deceased saver at death. This will be a benefit to the 150,000 married ISA savers who die each year. Also from April 2015 the ISA limit will be increased to £15,240. The Junior ISA and Child Trust Fund limits will both be increased to £4,080.

Pensions and Annuities

Changes to Death Benefits

The following is a summary of the options and taxation of pension death benefits effective from 6 April 2015.

Drawdown/uncrystallised funds and the member dies prior to age 75

Option 1 – Lump sum death benefit

  • Both crystallised and uncrystallised funds can normally be paid as a tax free lump sum to an individual or to a trust
  • Uncrystallised funds will be tested against the member’s lifetime allowance

Option 2 – Beneficiary drawdown

  • A dependant’s drawdown will not be restricted to a spouse or financial dependant from 6 April 2015 and can be paid to any beneficiary. This will be called a dependant’s or nominee’s drawdown
  • A new dependant’s/nominee’s drawdown set up on or after 6 April 2015 will be a flexi-access drawdown
  • A dependant/nominee will normally be able to receive lump sums and/or income from the dependant/nominee drawdown free of tax for their lifetime
  • Uncrystallised funds will be tested against the member’s lifetime allowance

Option 3 – Beneficiary annuity

  • The option of an annuity purchase will be available to any beneficiary and not limited to a spouse and/or dependant
  • Annuity payments will normally be free of tax in the hands of the recipient
  • Uncrystallised funds will be tested against the member’s lifetime allowance

Drawdown/Uncrystallised funds and the member dies on or after age 75

Option 1 – lump sum death benefit

  • Both crystallised and uncrystallised funds can be paid as a lump sum to an individual or to a trust
  • Taxed at a flat rate of 45% on payments made between 6 April 2015 and 5 April 2016
  • And taxed at the marginal rate of the recipient from 6 April 2016
  • No test against the member’s lifetime allowance

Option 2 – Beneficiary drawdown

  • Can be paid to any beneficiary, and will be a dependant’s or nominee’s drawdown
  • A dependant/nominee will receive lump sums and/or income from the dependant/nominee flexi-access drawdown taxable at their marginal rate
  • No test against the member’s lifetime allowance

If you need any further guidance or clarification on this then please give us a call and we will be happy to help – 01772 825755.


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