A YORKSHIRE wealth management firm claims to have found a way of minimising the downside of a new Government tax regime.
Although the introduction of the Government’s Lifetime Allowance (LTA), which takes effect in April 2014, can create “unseen” tax liabilities for the beneficiaries of workers who die with more than one pension arrangement, a new scheme can reduce the harmful impact, according to Leeds-based Pearson Jones.
Peter Heckingbottom, Pearson Jones investment director and deputy managing director, said yesterday: “Under the new legislation, the benefits from a Registered Death In Service Scheme and any funds returned from all company pension arrangements will be combined. If the total is above the LTA, there will be a 55 per cent tax charge on the surplus benefits, which the beneficiaries will have to pay even though they will not have been able to plan for this.
“The legislation which introduced LTA also brought in Excepted Group Life Schemes, which takes Death In Service benefit beyond the scope of the LTA.
“Companies which do not wish to expose their senior staff’s beneficiaries to unforeseen and possible significant tax liabilities, should consider introducing an Excepted Group Life Scheme to reduce the effect of any potential tax charge, without affecting the cost of existing Death In Service arrangements.”