Spring has finally arrived and London is suddenly bathed in daffodils and sunshine. Well as a matter of fact I saw the first daffodils in St James Park on New Years Eve and no I wasn’t half sozzled at the time…but I did some research and this is apparently quite possible with certain daffodil varieties and in a particularly mild early winter, which we had, allegedly, as I was in Australia watching England lose (badly) at cricket.

The clocks have sprung forward and the lighter evenings are upon us. I can hear the promise of clattering glasses in a beer garden and the sound of the central heating clocking off for the final time which is just as well as I doubt I will be able to afford that luxury for much longer. Still, I’m sure all will be fine by next winter and for now let the sun shine I say…

There are some useful indicative financial figures below including annuities (yes remember those) and life insurance premiums. Please note these are for indication purposes only.

With the introduction of IHT on pensions from next April there is considerable chatter about annuitizing, paying tax on the income and using the balance to fund a life insurance policy held in trust. Or, alternatively drawing income under something known as flexi access drawdown, paying tax and using the balance to fund a life insurance policy held in trust. Doing nothing might also be the best answer.

The debate centres around the potentially high total tax rates on a pension fund from April 2027; IHT at 40% on the death of the pension holder followed by income tax at up to 45% when the beneficiaries draw down on the income, giving an overall tax rate of up to 67%. Drawing down income from the pension now or from an annuity, paying tax at 45% and using this to fund a life policy written under trust should mean less tax overall.

Consideration needs to be given to timing; the strategies above mean accelerating the tax payment possibly by many years, especially if a surviving spouse inherits the pension tax free and lives for many more years. Also how much tax will the beneficiary actually pay? Will they actually be a 45% tax payer or will the pay at lower rates? Might they be resident outside the UK?

This is a very complex subject and hence impartial advice is recommended.