Death and drawing of benefits
This is not the most uplifting topic, but it is essential that members to know what can happen to their scheme.
Where will your funds go in the event of death?
Death before taking benefits
If you pass away prior to taking benefits, the fund can be paid as a tax-free lump sum to your beneficiaries, up to age 75. After age 75 a stand alone tax of 55% is payable on the lump sum. In your application for a SSAS you will be asked to complete our 'Expression of Wish Form' nominating your beneficiaries. The lump sum will usually be free of inheritance tax. However, If the lump sum exceeds the Lifetime Allowance there will be a tax charge of 55% on the excess funds. The SSAS has 2 years to pay benefits after death and this can be fairly complicated as assets need to be sold to provide the funds.
Death after taking benefits
If death occurs after taking benefits, the outcome depends upon how benefits are being taken. An annuity may provide a dependants pension, depending on the type of annuity purchased. If you die whilst in Capped or Flexible Drawdown, your nominated beneficiary has three options:
The remaining fund is paid as a cash lump sum minus a tax charge of 55%
An annuity can be purchased with the fund
Pension can be continued to be drawn thus allowing the flexibility of the SSAS to be
Providing a Widow's Pension
If death occurs after starting to draw benefits (including just taking the tax-free cash sum), the fund can be used to provide an annual pension to a spouse or other dependants. Alternatively, an annuity can be purchased for the spouse or dependent.