Pensions Under Trust

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Pensions Under Trust

Many company and private pension schemes pay generous benefits in the event of the death of the employee or policyholder before they reach retirement. This is usually referred to as a death in service benefit.

Company pensions under trust

Often, company pension schemes pay out as much as four times the employee's annual salary (regardless of length of service) while a personal pension would generally pay out the full fund value at the time of death. Other types of pension however may have different ways of calculating death in service values.

For many people, particularly those in company pension schemes this benefit is a valuable asset which they rely on as an important way of providing financial security for their families if they die before retirement (when they are also more likely to have dependent children).

Many company schemes are set up automatically under trust and payouts are at the discretion of the trustees. Many people with private pension arrangements also decide to place their pensions in trust for their families.

Up until now, having these schemes in trust has meant that the proceeds paid on death would not carry an inheritance tax liability as it is not treated as part of the estate.

The changes in the 2006 budget however mean that some types of trusts may now be subject to new tax charges.

If you have a pension scheme where death benefits may be paid into a trust on death and you are worried about how the new rules could affect your family, it is a good idea to talk to a professional before making any changes to any existing wills or trusts. If you complete our Quick Enquiry Form above, we can arrange for one of our independent experts to contact you at a time that suits you. If you prefer, you can call us on 0845 108 0505.

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