I HAVE a retirement annuity trust scheme and on my death I’d like my wife and children to receive whatever is left as a lump sum payment, is this possible?
Sean Gillease, business development manager, Sovereign Trust (Channel Islands) Ltd, replies:
YES, it should be possible for a lump sum of the remaining balance held in your pension to be paid to your wife and children. However, the tax treatment of this type of payment may differ depending on whether or not you’ve received any benefit from your retirement annuity trust scheme during your lifetime.
The Guernsey pension rules set out how benefits can be paid in the event of a pension member’s death and this differs subject to whether the individual member has received any form of pension benefit themselves during their lifetime.
If a member of a retirement annuity trust scheme dies before they have taken any benefit from their pension, it should be possible for either a tax-free lump sum to be paid to the member’s nominated beneficiaries or for an annuity to be payable to the member’s nominated beneficiaries, which will be taxable according to the recipient’s personal circumstances.
If a member of a retirement annuity trust scheme dies after they have taken any benefit from their pension, it should be possible for either an annuity to be paid to the member’s nominated beneficiaries, which will be taxable according to the recipient’s personal circumstances, or a lump sum can be paid to the member’s nominated beneficiaries. However, this lump sum payment would be subject to 20% income tax which would be withheld prior to payment by the trustees.
You will need to liaise with the trustees of your retirement annuity trust scheme to clarify exactly what options are available upon your death and you should provide them with your ‘expression of wishes’ to ensure they understand how you would like any remaining funds to be distributed and who they should be paid to. You should also consult with your financial adviser and/or tax adviser to ensure that your instructions are made in consideration of your overall long-term financial planning objectives.
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