Freedom and choice in pensions – No more death tax

The Chancellor announced on 29 September 2014 that from April 2015 onwards, individuals will have further freedom with their pension pots after their death.

For those under the age of 75 with a drawdown arrangement (where the fund remains invested and an income is taken from it) will be able to pass on this pot of money tax free when they die. This is a significant change from current rules, which state that a 55% tax charge will become due to the person inheriting the pot of money after death of the policy holder.

After the age of 75 the pot of money will pass on to a beneficiary who can then draw down on the money to provide an income, but this will be taxed at their marginal rate of income tax.

This does not apply to annuities or scheme pensions, where the funds within the pension pot are permanently exchanged for a lifetime income.