Scheme Pension is an alternative way to take an income (pension drawdown is an other) and is based on a client’s individual circumstances. It offers the potential for taking a higher income in certain situations because it is not restricted by HMRC limits.
Scheme Pension can be utilised at any time to provide income after age 50 (55 from 2010).
An actuary will determine the maximum income that can be withdrawn based on the client’s age, mortality and fund `value. In many situations (although not all), this will allow a larger income to be taken. This can be particularly useful for people with a shortened life expectancy, allowing them to take more money out of their fund whilst they are alive and make ‘Gifts out of Income’ if required.
(As long as HMRC rules for ‘Gifts out of Income’ are met, the gifted money is not liable for inheritance tax when the client dies i.e. the 7 year rule does not apply.)
A client has two choices at outset as to how his Scheme Pension is established and these are as follows:
1. A predetermined term of 10 years. If the member dies within the ten year period, the remaining pension installments can continue to be paid and taxed as income, assuming that there are sufficient pension funds to continue the payments. The scheme pensionwill be reviewed every 3 years.
Or
2. A Scheme pension reviewable every 3 years by the scheme actuary until death, assuming that there are sufficient pension funds to continue the payments.
Careful management and regular reviews should result in maximum income and minimum fund left on death.
For specialist retirement planning advice including annuities, income drawdown, scheme pension and advice on an equity release sceheme
Call us on 0800 043 0725 or visit our retirement solutions website www.retirementsolutions.co.uk
