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Home Pensions & retirement Things to consider Legacy planning

Legacy planning

Depending on your circumstances, leaving a pension to a loved one could be a good option. If you are under 75 when you die then any payments from a pension won't normally count towards your £325,000 inheritance tax allowance (£650,000 for married couples or civil partnerships).

If you have saved into your pension plan you have a number of options to consider when deciding how much to leave your loved ones. We’ve highlighted these below:

Leave it invested
Take regular income or lump sums

What this means for the tax they will pay

If you die before the age of 75

  • Anything left in your pension can be paid to your beneficiaries
  • This could be paid as a lump sum or they can take regular withdrawals
  • Generally, in either case it will be tax free (as long as it doesn’t go over your lifetime allowance*)

If you die after the age of 75

  • Anything left in your pension can be paid to your beneficiaries
  • This could be paid as a lump sum or they can take regular withdrawals
  • Any lump sum or withdrawals paid out will be subject to tax based on the individual tax position of the beneficiary
Go to the government's income tax site

* Lifetime allowance rates may change and some individuals may have protection giving them a higher personalised lifetime allowance

Things to consider

There are a number of factors that may affect how much you are able to leave to your loved ones.

  • How much is your house worth?
  • Do you have any other savings and investments?
  • Are you expecting any other large windfalls or inheritances?
  • Do you have any other valuable assets?
  • Have you made a will or reviewed and updated it recently?

You should also consider updating your 'Expression of Wish' form if you haven't looked at it for a while. This will help the scheme administrators determine who to pay your pension benefits to if you die.

For your 'estate' (your property, money and possessions) to be distributed when you die, an application for the legal right to deal with your estate will need to be made to the local Probate Registry.

Go to the government's probate page

Family homes and inheritance tax

In addition to the existing £325,000 nil rate band, known as NRB, a dedicated main residence nil rate band, known as RNRB, is intended to protect the family home from Inheritance Tax. This applies if a home has been left to children (including adopted, foster or stepchildren) or grandchildren (family homes are transferred to spouses and civil partners tax-free). The RNRB was introduced on 6 April 2017 and will increase over the coming years:

Tax year Threshold amount
2017/18 £100,000
2018/19 £125,000
2019/20 £150,000
2020/21 £175,000

The RNRB may also be available to you if you’ve downsized or sold your home on or after 7 July 2015. This allows assets of an equivalent value to be passed on to your direct descendants.

For estates with a net value of over £2m, the RNRB will be withdrawn at a rate of £1 for every £2 over the £2m threshold.

This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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We can help

Transferring a pension is a big decision, so you should seek advice first. We offer advice that’s in your best interests, even if it means recommending that you leave your money where it is.

Call us on 0800 368 6882, Monday to Friday, 9am - 5pm.

Fidelity's retirement service

Pension Wise

The Government offers a free and impartial guidance service to help you understand your options at retirement. This is available via the web, telephone or face-to-face through government approved organisations, such as The Pensions Advisory Service and the Citizens Advice Bureau. You can find out more by going to pensionwise.gov.uk or by calling Pension Wise on 0800 138 3944.

pensionwise.gov.uk
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Fidelity Personal Investing does not give advice based on personal circumstances so you are responsible for deciding whether an investment is suitable for you. In doing so, please remember that past performance is not necessarily a guide to future performance, the performance of funds is not guaranteed and the value of your investments can go down as well as up, so you may get back less than you invest. When investments have particular tax features, these will depend on your personal circumstances and tax rules may change in the future. Before investing into a fund, please read the relevant key information document and ‘Doing Business with Fidelity’, a document that incorporates our Client Terms. If you are investing via the Fidelity SIPP and have not yet received a letter from us confirming you have moved to our new system, or are opening a new SIPP today you should read the Fidelity SIPP Key Features Document incorporating the Fidelity SIPP Terms and Conditions. Alternatively, if you open a new SIPP account after 31 January 2019 and are under 53 years old, or if you have already received a letter from us confirming you have been moved to our new system, you should read the Doing Business with Fidelity document incorporating our Client Terms. You should regularly review your investment objectives and choices and if you are unsure whether an investment is suitable for you, you should contact an authorised financial adviser.

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