Chancellor reduces pension death tax
The Chancellor announced last month that he is making pension death tax less punitive from April 2015.
The new rules mean that if the individual dies before their 75th birthday they will be able to pass on their remaining pension fund to anyone as a lump sum completely free of tax - even if the scheme is in a drawdown account and crystallised. An individual receiving a pension fund from a person who dies before age 75 will pay no tax on the money they withdraw from that pension, whether it is taken as a single lump sum, or accessed through drawdown.
Should someone die after their 75th birthday their nominated beneficiary will be able to access the pension funds - at any age - and pay tax at their marginal rate of income tax. If they opt to receive the entire pension fund as a lump sum, it will be subject to a 45% tax charge.
It is important to ensure you nominate who you would like to receive the benefit from any defined contribution pension (Personal Pension, Stakeholder Pension, SIPP or Group Defined Benefit Scheme)