Further Pension Reform Brings Good News

Those looking to pass on their pension fund received a boost when the Government announced that they are following through on their promise to scrap the present 55 per cent tax charge on the lump sum payment on death.

These changes will make it possible for money purchase pension funds, to be passed on to beneficiaries free of tax.

What’s changing?

  • Death before 75 – the entire pension can be taken tax-free, in instalments or as a one-off lump sum.  This applies whether or not the benefits have been taken.  The tax charge on death is to be cut from 55 per cent to zero.


  • Death after 75 – the pension savers will be able to nominate ‘who inherits’ their remaining pension fund.  The fund can then either be taken as income and taxed at the beneficiary’s marginal rate, or they will be able to take it as a lump sum less a 45% per cent charge.

These rules will apply to payments made on or after 6th April 2015, rather than the date of death.

How does this affect me?

The new pension rules create a genuine incentive to save, knowing that family members can benefit from the remaining fund.  The member’s beneficiaries rather than dependents as is the case at present, have the ability to take over the pension pot and either use it to produce income or as a lump sum.

These changes will standardise the death benefit treatment for the different flexible income options which are incorporated with pension income drawdown schemes.

Remember to keep your pension scheme administrator updated with your Benefit Nomination Form. For further advice on pension arrangements contact Brian Ollerton at our Haslingden office on 01706 213356 or email brian.ollerton@whnsolicitors.co.uk