If they die after age 75, then income tax is due on pension benefits taken by the beneficiary.
Approaching lifetime allowance – crystallise or not?
If your client has pension funds that are more than their available lifetime allowance, then they will have to decide what strategy to adopt.
They could decide to crystallise all their pension funds before 75. Alternatively, they could only crystallise funds up to 100 per cent of their lifetime allowance and designate these to drawdown, leaving the remainder – the excess - uncrystallised.
If they choose this second route, they will then have to decide how to manage the second drawdown BCE at age 75. Should they take out an income which will allow them to always maintain the same drawdown fund value as the day they crystallised, and so avoid a lifetime allowance charge?
Or, in either case, should they just enjoy full investment growth, and resign themselves to paying a lifetime allowance charge at age 75? After all, they get to benefit from higher funds and paying a government charge may not be the worse outcome.
Key issues
There is no right or wrong answer. It depends upon the specific circumstances of, and beliefs of, the client. There are, however, several key points to consider when pension planning to avoid or reduce a lifetime allowance charge.
