Estimated reading time: 5 minutes
In 1789 Benjamin Franklin wrote:
"…but in this world nothing can be said to be certain, except death and taxes."
Whilst this may sadly still be true, having to pay high levels of taxes on the death benefits from a SSAS isn’t as “certain” as it once was.
If you die before reaching the age of 75, any pension savings remaining in your SSAS can generally be paid in the form of a lump sum or a pension to your loved ones. If the lump sum is paid within two years of your death, it can be paid free of income tax. Similarly, if your beneficiary’s pension fund is set up within the two years any pension payments from this fund will not be subject to income tax.
If you die on or after reaching age 75, the lump sum or pension payments can still be made to your loved ones, but the person receiving the benefits will have to pay income tax on the payments at their marginal rate of tax.
Lump sum benefits can also be paid into a trust, (although an up-front tax charge of 45% of the lump sum amount could be applied), or to a registered charity of your choice in certain circumstances.
Benjamin Franklin is also thought to have written:
"Life’s tragedy is that we get old too soon and wise too late."
This is also sadly true. People put off thinking about the death benefits that can be paid from their SSAS – it’s not today’s problem - but spending a few moments thinking about your circumstances and taking any necessary action, could save taxes being imposed on your pension savings in the future.
Things to think about:
An Expression of Wishes form confirms to the trustees to whom you wish any benefits to be paid in the event of your death, and whether the benefits should be paid as a lump sum or as a pension. The trustees will use the Expression of Wishes form when considering what benefits to pay, and to whom. It is therefore important that the trustees have your completed Expression of Wishes form.
It is also important that you review and update your Expression of Wishes form regularly - especially when there is a change in your circumstances; for example, if you marry, divorce, have children, or following the death of a loved one, or if your loved ones’ circumstances change.
Our Expression of Wishes form and Member's list of dependants form can be found at the bottom of the page.
This is relevant not only for death benefits, but also for your retirement benefits. You may be able to take action now to ensure your pension savings are not subject to a lifetime allowance excess tax charge.
See our blog post “Are you leaving the lifetime allowance charge to chance?” at the bottom of the page.
Another saying that Benjamin Franklin is credited with is:
"Don’t put off until tomorrow what you can do today."
And that for me is valuable advice. Putting your financial affairs in good order could not only save tax, but may also spare your loved ones unnecessary distress at what will be a difficult time for them.
Are you leaving the lifetime allowance charge to chance?
The LTA charge for pension savings is akin to picking that 'chance' card in a game of Monopoly. SSAS Client Manager, Lisa White explores.Find out more