HLD Investment Proposition Update – 26th July 2024
In June 2024 we announced that we were making some changes to our investment proposition. These changes have now been completed.
Confirmation of these fund changes will be posted to all impacted policyholders in the coming week.
Financial Advisers can obtain policy valuations reflecting this fund change by logging onto the Service Centre above.
For more information on the funds currently available, please click on ‘Pensions’ or ‘Investment Bonds’ in the header banner.
Hawthorn Platinum Personal Pension Planholders. Pension Changes due to take effect 6 April 2024
Abolition of Lifetime Allowance effective 6 April 2024
Changes to pension rules are due to take effect from 6 April 2024. These changes involve the abolition of the Lifetime Allowance (LTA) and its replacement with two new limits.
What was the Lifetime Allowance Limit which is being abolished?
The Lifetime Allowance Limit was a mechanism for limiting tax-favoured pension savings in registered pension schemes. If the total value of your pension benefits exceeded the LTA you may have had to pay extra tax on the excess. In this context, you could have taken 25% of your LTA tax free.
What is the LTA being replaced with?
The LTA is now being replaced with two new limits:
- Lump Sum Allowance (LSA)
During your lifetime you can now take up to £268,275 tax free (25% of the LSDBA).
- Lump Sum Death Benefit Allowance (LSDBA)
The cumulative cash value of all tax free cash and other lump sums paid out during your lifetime or on your death will now be tested against a new allowance called the ‘Lump Sum and Death Benefit Allowance’ (LSDBA). The LSDBA is currently set at £1,073,100*.
When you die, you may be able to pass any of your remaining pension funds to your beneficiaries.
- If you die before 75, the tax free lump sum death benefit available to your beneficiaries is limited to the LSDBA*. Any benefits taken by your beneficiaries in the form of income benefits** will be tax free (as is currently the case). However, for any benefits to be tax free they must be drawn by your beneficiaries within 2 years of your death.
- If you die after age 75, then your beneficiaries will pay income tax on any of your pension money they receive at their marginal rate(s).
*If you hold any form of LTA protection this will also apply to your LSDBA and you may be entitled to a higher LSDBA and LSA as a result. It is also important to note that most tax-free benefits paid during your lifetime will also be deducted from your LSDBA.
**Death benefits in the form of tax free guaranteed income within Hawthorn Life is only available to your beneficiaries if you have selected the “Dependant Continuation Option” on your Pension Plan.
I have previously withdrawn funds from my Pension and/or have reached Age 75
If you have previously withdrawn funds from your pension(s) or have reached Age 75 you would have been notified, at that time, of the percentage of your LTA used by that event.
On 6 April 2024, all LTA percentages will be converted to LSA amounts via a standard transitional formula prescribed by HM Revenue & Customs.
When you receive your next Anniversary Statement after 6 April 2024 your LSA values will be included in the statement. Alternatively, you can contact us for the amount.
I have never withdrawn funds from my Pension nor have I reached Age 75
If you have not previously withdrawn funds from your pension(s) a LSA used will be calculated when you withdraw funds for the first time.
Transitional tax-free certificate
You may be eligible to apply for a transitional tax-free certificate. A transitional tax-free certificate should only be applied for where you can provide complete evidence that you have received, as of 6 April 2024, a lower amount as tax-free lump sums than that provided for by the HMRC’s transitional calculation.
If you wish to apply for a transitional tax-free certificate please consult with your financial adviser to assess your eligibility.
Please note
Hawthorn Life strongly recommends that you seek advice on these new limits and how they may impact you from your regulated financial adviser and guidance from Pension Wise, The Pensions Guidance Service.
A financial adviser can help you clarify your situation, run through all your options, and explain how to manage potential tax liabilities. By getting financial advice that is tailored to your individual circumstances, you’ll feel more confident that you’re making the right decisions for you. If you don’t have a regulated financial adviser, please refer to https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-yourpension/find-a-retirement-adviser which provides a directory to help you find a regulated and impartial adviser to help you make the best decision about your retirement.
Pension Wise is a service provided by MoneyHelper and is a free impartial service to help you understand how you can take money from your pension pot. Pension Wise can be accessed online at https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise. It also offers free appointments where you can talk through your options to help you make the right decision. To arrange an appointment, call 0800 138 3944 between 8am and 6.30pm, Monday to Friday.
Additional information can also be found on the MoneyHelper website https://www.moneyhelper.org.uk/en.
Financial Advice
Before you make any decisions, we would strongly recommend you speak to your financial adviser. If you do not have a financial adviser, whilst seeing a financial adviser might have an upfront cost, it could help you avoid making small mistakes that could catch up with you in the long run. Moneyhelper can assist you in describing how financial advice works, the types of advisers you can speak to and when it is appropriate to use a financial adviser. This information is viewable here: www.moneyhelper.org.uk/en/getting-help-and-advice/financial-advisers
Please note that obtaining advice or seeking guidance is a key part of protecting yourself and your family when making any important financial decision.
Pension Wise. Your Money. Your Choice
We encourage you to take advantage of Pension Wise, a government service from MoneyHelper that offers free, impartial guidance about your defined contribution pension options.
An appointment with Pension Wise is free and will help you understand what your overall financial situation will be when you retire. The service will talk you through your options to help you make the right decision. You will also find out about the other factors you need to consider when deciding on your options before retirement.
To book a free appointment call 0800 138 3944 or visit Book a free Pension appointment (moneyhelper.org.uk)