SIPP Plus

Although the penal taation of unsecured pension funds on death of the member after age 75 was removed with effect from 6 April 2011, there may still be circumstances where a scheme pension with a 10-year guarantee may be more attractive than continuing in drawdown. A scheme pension can also offer a higher income, whilst still avoiding annuity purchase.

Maximum unsecured pension is allowed at 100% of the figure reached by applying the appropriate Government Actuary Department factor applicable for their age and sex to the value of the member’s fund. From age 75this is re-assessed annually.

The annual review prevents the running down of the fund beyond a certain level (unless investment returns are dramatically bad) and when the member and any surviving spouse dies (assuming the survivor was over 75 on death), then a 55% tax charge will apply to the remaining fund unless it is paid out to charity.

A separately registered SIPP enables the trustees to offer the member an actuarially set scheme pension, which can be fixed or escalating. Crucially, a 10-year guarantee can be incorporated whereby upon the death of the pensioner before the end of that 10-year period, the payments will continue to their chosen beneficiary/ies for the remainder of the guarantee period, subject only to income tax in the hands of the recipient(s).

For a more detailed description of the scheme pension please refer to Scheme Pension. Please refer to Adrian McKinnell or Marc Gwynne if you think this option could be of interest.