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Estate planning using pension funds

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Are you in the fortunate position of having a pension fund that you do not need to draw on?   Would you be interested in ways of passing some of this on to your family free of inheritance tax whilst you can have the joy of seeing them benefit when they money is most useful to them?


Cash drawn down from your pension fund is likely to include 25% tax free with the balance being taxed at your marginal rate.  If this results in tax at the higher rate of 40% then the effective rate of tax on the sums drawn down is 30%. 



A sum of £50,000 is drawn from your pension fund.  There is no tax on the first  25% - £12,500 – but the balance of £37,500 may be taxed at 40%. The total tax payable is £15,000 which equates to 30% of the total funds drawn.


An investment into an Enterprise Investment Scheme (or a Venture Capital Trust) would generate tax relief of 30% which could wipe out the tax liability.  At the end of the minimum holding period of 4 – 5 years, the money (on which no tax has been paid) would be available to be gifted.  The gift to the family would be a Potentially Exempt Transfer which would fall out of the estate after 7 years for Inheritance Tax purposes.    



Why not ask for more details at SWLaw Investment & Financial Planning Ltd ?