In the Budget Notes 2008, published after the Chancellor had delivered his Budget (Budget Note 45) the Government announced its intention to continue with the arbitrary age of 75 as the date by which all must stop funding for a pension and start drawing it. Also contained is draft legislation to introduce unauthorised tax charges and inheritance tax to funds remaining post age 75 held in scheme pensions. However, unlike alternatively secured pensions where a surplus on death may be given to charity no such option appears to be given for surpluses arising on death in scheme pensions. However, there was one piece of good news, the inheritance tax nil rate band may now be used to offset against a fund arising on death in both ASP and scheme pensions. I fear that in reality it will be of little use since most people who draw pensions via ASP or scheme pensions post age 75 will on death have no spare inheritance tax nil rate band!
I believe that the position on age 75 is untenable. The Government is still failing to act on their blatant breach of the European Directive on Discrimination. Age 75 has been set by the Government totally indiscriminately; they have offered no justification for age 75. This is a clear breach and discriminates against the entire UK population age 75 and over. Why should 75 year olds be forced to draw their pension at that age? Is this the date they must stop working? I believe it will not be long before the Government is taken to the European Courts over this. Many of our clients are extremely unhappy with the totally unfair and penal taxes for those over age 75. They will be prepared to take on the Government.
It also seems churlish for the Government to discriminate between surplus ASP funds, which may go to charity, and surplus scheme pension funds, which may not.
However, scheme pensions remain a fundamental tool in personal financial planning for the high net worth individual. Clearly the message is that post age 75 you must draw as much pension as possible. The scheme pension allows just that and permits trustees to provide a ten year guarantee unlike an ASP where no guarantee is available.
David Seaton is director of consultancy at Rowanmoor Pensions.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation