Change 7: Death after buying an annuity – tax cut

This week we have been detailing the pension changes due to come in from April 2015.

Change 7: Death after buying an annuity – tax cut

What is changing:

When you buy an annuity, you can choose for the income to be paid to your spouse or partner after you die (a joint life annuity). You can also choose a guarantee period or value protection – for example, if you buy a 10 year guarantee and die after 2 years, the annuity will be paid for another 8 years to your spouse, partner or beneficiaries.

Currently, your spouse, partner or beneficiaries pay income tax at their marginal rate. In the Autumn statement the Chancellor announced  it will be tax free if you die before age 75.

A joint life or dependant’s annuity will now be able to be paid to anyone after you die. On their subsequent death any value protection or remaining guarantee period can be paid to anyone.

Who will be affected:

Anybody with a joint life, value protected or guaranteed annuity who dies before turning 75. The first income payment to your partner, spouse or beneficiaries must be made after 5 April 2015, otherwise it will be taxable.

If you have any queries in relation to these changes or need any further guidance, please do not hesitate to contact us on 01772 825755.

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