UK pensions – Chancellor abolishes death tax.
Information correct on September 29th, 2014
Recent changes affect death tax for UK Pensions
George Osborne made the announcement at the Conservative Party Conference on 29th September 2014. Currently a tax charge of 55% applies on the payment of a lump sum from an individual’s UK pension after their death if they have commenced their pension benefits (eg are in drawdown) or if they are aged over 75 (regardless of whether pension benefits have commenced on not). The removal of this tax charge on death will apply to all inherited pensions received from April 2015. Under the new rules for defined contribution pension plans, there will be tax-free access to the pension pot of those who die before age 75, to any beneficiary regardless of whether pension benefits had commenced or not. If the deceased is 75 or over, they will be able to pass their defined contribution pension to any beneficiary who will then be able to draw down on it at their marginal rate of income tax. If the beneficiaries wish to receive the pension as a lump sum payment, it will be subject to a tax charge of 45%.