Advisers should be aware there may be a double tax charge on Alternatively Secured Pensions (ASP) in some cases following the Budget's announcement on Inheritance Tax (IHT) rules for pensions, claims Skandia.
It says this double tax charge could occur when a dependent who has benefited from ASP funds dies before the age of 75, with the remaining funds being paid out as a lump sum to anyone but a charity. In this case, according to the guidance provided with the legislation, the IHT charge of 40% will take priority over the pension scheme tax charge of 35% which is applied to the remaining fund after the IHT has been deducted. According to Skandia the net affect of both charges is a total tax charge of 61%, which is 40% IHT plus another 21% which is 35% of the remaining 60% of the fund. As ...
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