Dalriada News

Mike Spink

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The Guidance Guarantee: add that one to your list…

George Osborne announced the latest development in his pensions revolution: a scrapping of the 55% ‘death tax’ levied when deceased members’ pension pots pass to certain individuals in certain circumstances. Whilst a change had been expected, this was probably somewhat better than had been predicted.

December’s Autumn Statement had been the expected unveiling of the post-consultation decision, but with the continuing focus on austerity outlined at the Conservative Party Annual Conference today, any good news that could be brought forward must have been too hard to pass up. Whilst we have the high level facts today, it appears that further detail will follow in December. For example, will pots of members who die before 5 April enjoy the new tax treatment by simply arranging for the Estate to be settled after April?

As the UK’s pensioned / DC population increases via Auto Enrolment, so the case for taking a long hard look at the benefits of pensions savings seemingly gets stronger by the month. Of course, Inheritance Tax (IHT) remains an issue for a relatively small proportion of the population, but where IHT planning is relevant, we can now expect to see further investment to leverage the Lifetime Allowance. Many people may still prefer to purchase some form of annuity (for all manner of reasons) and those providers who are currently busy working to innovate within this part of the retirement provision market now have some further thinking to do. And as for the retiree, today’s news potentially makes things a tad more complicated with their closest family: drawdown is now streets ahead when it comes to keeping wealth in the family, even if an annuity of some sort might appear to be the ‘right’ choice for the individual.

As for the Guidance Guarantee, it looks increasingly as if those who will provide the Guidance will need to demonstrate more than a reasonable knowledge of Tax Planning. The need was always present to a degree, given the need to highlight the potential drawbacks in taking too large a drawdown payment in a particular Tax Year – but today’s news places pensions at the heart of some increasingly difficult decisions for Joe (and Jane) Public. With six months still to go, our Guiders-to-be must be hoping that we’re finally closing in on the substantive changes and a clearer picture of our brave new pensions world.