The member must be aged 55 or over to access their pension. The amount accessed will be subject to a lifetime allowance test, but this option can be effective if the goal is to reduce a potential lifetime allowance charge liability at age 75.
A further point to consider is that, if income is paid through flexi-access drawdown, the money purchase annual allowance will be triggered. This would limit the member’s future ability to build up their pension savings – although this is unlikely to be a concern for those with lifetime allowance issues.
To offer a payroll giving service the scheme administrator must set up a contractual arrangement with a Payroll Giving Agency. Agencies may charge an administration fee, which could either be paid by the scheme or be deducted from the member’s donation.
Setting up such an arrangement would require additional administration work on the part of the scheme administrator. These costs and complexities mean that, even if you conclude that payroll giving is a suitable option for your client, it may be challenging to find a pension provider who will facilitate it.
Gifting after death
Charities can be the recipients of an authorised lump sum death benefit payment from a pension scheme. If the member was aged 75 or over when they died, or if the member was under 75 but the payment was not designated until more than two years after the date the scheme were aware of (or should reasonably have been aware of) the member’s death, the payment will be taxable. As a charity is set up as either a trust or a company, it is a non-qualifying person, and tax will be charged at the special lump sum death benefit charge rate of 45%.
However, if certain conditions are met the lump sum may be paid as a charity lump sum death benefit. A charity lump sum death benefit is paid tax free, so the special lump sum death benefit charge does not apply.
A charity lump sum death benefit may only be paid from money purchase arrangements. It can be paid following the death of a member of a money purchase arrangement where:
- there are no dependants of the member; and
- the member has nominated the charity as a beneficiary
If the member leaves no dependants, but has not nominated a charity, a lump sum cannot be paid as a charity lump sum death benefit. The lump sum also will not qualify if the member has nominated a charity but there is a living dependant.
