How To Spend Your Pension Fund AND Leave A Legacy

How To Spend Your Pension Fund AND Leave A Legacy
Underwater by Andy Deitsch. Why?

Whether you’re in retirement or you’re still building your pension fund, here’s a cost effective way to ensure those you love will receive a tax free lump sum on your death, even if you spend your whole pension fund!

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How Your Pension Fund Can Protect Itself

It’s a natural instinct to want to pass your money onto your children and others.  But with more of us living longer, and an increasing number of us needing expensive care towards the end of our lives, the prospect of being able to leave a meaningful sum is a diminishing one.

But it doesn’t have to be that way.

Once you reach 55, you can draw benefits from your pension. 

You could set up an annual withdrawal and use the proceeds to invest in a life assurance policy for the benefit of your children.  Or a charity.  Or anyone else, for that matter.

Your pension would effectively be protecting itself.

On your death, a lump sum would be produced to provide your legacy.

And that means you could spend your whole pension fund during your life, in the comforting knowledge that you won’t be depriving those you leave behind of the legacy you’d like them to receive.

If You’re Not Yet 55

Although you won’t be able to withdraw money from your pension fund so it can ‘protect itself’, you will be able to set up a life assurance policy for beneficiaries of your choice.  You’ll simply have to pay the premiums from your income or your savings.

It’s the perfect way to provide money for your spouse or partner should you die early, enabling them to enjoy the retirement you had in mind for them.

It’s Tax Efficient

Your pension fund is not subject to Inheritance Tax.  And if the life assurance policy is written in trust, it won’t be subject to Inheritance Tax either.

Interestingly, there’s an Income Tax advantage with the life assurance policy.

If you die before age 75, your pension fund can be paid, tax free, as a lump sum, or as a drawdown pension to any beneficiary. 

But if you die at or after age 75, the benefits will be taxed at your beneficiaries’ marginal rate, which could be as high as 45 per cent (as at February 2018).

The proceeds of a life assurance policy written in trust aren’t subject to Income Tax, no matter at what age you die.  And that could make it a lot more attractive for those you’d like to benefit.

It’s Flexible

Once you’re 55, under flexi-access drawdown, you could make tax free withdrawals from your pension to fund the annual life assurance premiums.

You’re able to withdraw 25 per cent of your pension fund this way, so there’s lots of scope to cover future premiums.

If you don’t draw an income at the same time as taking out the tax free cash, it won’t affect your ability to continue to contribute to your pension.

How To Protect Your Pension If You Have A Final Salary Scheme

Rather than transfer your fund to a personal pension to create a lump sum to pass on, you could leave the money where it is, to enjoy the worry-free guaranteed income during your lifetime.  Part of the income could be used to pay the premiums of a life assurance policy so that when you die, a tax free lump sum would be paid to your beneficiaries.

What It Costs

Life assurance premiums are dependent on a number of factors, including your age, health, and what sort of policy you’d like to take out.  Essentially, there are two types of policy.

Term Cover

Your chosen level of pension protection is guaranteed to be paid out should you die at any time during the term.  At a pre-set age, the cover ceases.  Typically, this would be age 80, 85 or 90.  You choose the term to match your needs.

Whole Life Cover

Your chosen level of pension protection is guaranteed to be paid out whenever you die.

The table below provides some indicative figures for the annual cost of pension protection of £100,000. 

pension protection

Find Out What Pension Fund Protection Will Cost You

Time is critical when it comes to life assurance.  The table above clearly illustrates the earliest you can put this in place, the least it could cost. 

That means more money is left in your pension fund for you.  And more for your loved ones.

Our pension protection service is provided by Vita, a firm that’s been providing independent expert advice since 2010.  Over the years, it’s arranged more than £1 billion of cover for its customers with the top insurers in the country, including Legal & General, Aviva, Zurich, AEGON, LV=, AIG Life plus many more.

SIPPclub Special Offer

SIPPclub has negotiated a deal with Vita to guarantee you the best price.  Through SIPPclub, you'll get a lower cost compared to going directly to the insurance company.  What's more, you can use Vita to run a free comparison of your existing life cover, using the SIPPclub discounted rates, to see if you could save money on your existing policies.

To qualify for the best rate deal, you must complete the form below.

Once you’ve completed the form below and hit the submit button, a friendly expert adviser from Vita will be in touch with you to discuss your specific requirements in more detail.  Vita doesn’t provide generic quotes online as they can often be inaccurate and misleading.

The adviser will provide you with quotations, options and advice specifically tailored to your personal circumstances and requirements.  They’ll need around 15 minutes of your time, but in return, you’ll receive a free, award winning report.

Should you decide to go ahead, the adviser will help you with the application forms and put your policy in trust, for tax efficiency.

Vita is authorised and regulated by the Financial Conduct Authority.  It takes full responsibility for the advice and recommendation.

The best bit is that you won’t be charged a fee... ever.  And above all, you’re never under any obligation to go ahead.

To discover what it’ll cost to protect your pension for those you care about, please complete the form below.

Pension Protection Service

To discover how to spend your pension fund and leave a legacy, please complete all the fields of the form below.

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That's our opinion.  Not just because AJ Bell was the first company to offer an online SIPP.  Nor that it's received many prestigious awards.  And not even because the wife of SIPPclub's Founder has an AJ Bell SIPP.  It's because it's one of the most competitive stockmarket SIPPs on the market. 

Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).  However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.

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