Page 38 - Phonebox Magazine October 2006

Finance Matters
brought to you by Advison Independent Financial Advisers
Should your pension be held under Trust?
Unlike most IFAs, Advison provide clients with regular personalised reviews of their investments and pensions, enabling us to ensure the assets they hold are still relevant to their circumstances. We would be pleased to discuss your specific situation and plan the most appropriate course of action for you. For full details about Advison please see our advert below.
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Advison is a small, friendly and reliable firm specialising in Investments, Retirement Planning and IHT Mitigation.
We offer a return to the traditional values only a smaller company can offer, a service we find is appreciated by the more discerning client. We are happy to see you in the comfort of your own home or at our relaxed, award-winning offices (with plenty of free parking).
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42 Phonebox Magazine
The answer to this will depend on both the type of pension in question and also your personal circumstances. However, perhaps a more pertinent question would be “should you consider putting your pension in Trust?”, the answer to which is almost certainly yes.
This is an issue which has often been overlooked by both advisers and clients alike in the past, often because of the complexities of Trust law and the fear that if you get it wrong, putting your pension into the wrong Trust could be worse than doing nothing at all. This problem has been exacerbated by the fact many pensions are, in any event, automatically set up under a Master Trust by the pension company.
Unfortunately, the truth is normally the opposite of this and a lack of action is likely to cause the most problems. The complexity of the subject has increased further this year due to the pernicious new Trust rules brought in at the last Budget.
The advantage of placing a pension in Trust is that it will not form part of your estate on death. This is particularly relevant for those who are single or widowed, as they do not have the option of leaving the proceeds to a spouse free of Inheritance Tax (IHT).
Whilst a policy set up under a Master Trust would enable the proceeds to be paid directly to the surviving spouse, this only avoids IHT at the time and would increase the survivor’s estate, thus only delaying the problem. If the proceeds had been placed into a suitable Trust and stayed there, then they would not be in anyone’s estate. The correct use of Trusts can therefore save considerable IHT for different generations of a family depending on the size of the pension fund.
The Periodic Charge on Trusts means that an element of tax will be paid within the Trust but this is limited to a maximum of 6% every ten years and is likely to be far less than would be the case if the proceeds went to the survivor’s estate and was then subject to IHT on their death.
If you have pensions and are concerned or unsure of the IHT consequences associated with them, then why not contact us. As well as ensuring your pension plans are set up in the most suitable way for your circumstances, Kevin and Andrew can also use their investment expertise to advise on the fund strategy going forward for your pensions. d