Transferring Pensions

Since pension freedoms in April 2015, many people have taken full advantage of this new found control and flexibility.

In particular, the tax advantages in death benefits now if dying before the age of 75. However, a recent court case has now highlighted the issues of transferring a pension whilst in poor health. In what has become known as the ‘Staveley case’, a client in knowingly poor health transferred out of her pension with her primary motivation being to prevent her ex-husband benefitting from the pension, with her children to benefit instead.

Typically pensions do not form part of someone’s estate but the recent Court of Appeal decision, however, has judged that as Mrs Staveley was terminally ill at the time of transfer, it should instead be judged as a ‘chargeable lifetime transfer’. Simply put they imply the transfer was as a means to reduce liability to Inheritance Tax. Mrs Staveley’s estate would now be liable for Inheritance Tax on the money transferred.

Going forward this could have a great impact on pension transfers for terminally ill people, with the potential consequence of a 40% charge on the value of any transfer, if the individual were to pass away within 2 years.

It is important to consult with an appropriately qualified financial adviser to ensure any decision you make about your pensions is the right decision both now and for the future.

At SMC, we hold the relevant pension transfer qualifications to be able to advise on complex matters such as this so feel free to contact us directly with any questions or concerns like this you may have.

Contact us today to see how we can help you with your pension.