Pensions, Death & Tax

The Chancellor has outlined his plans for the tax treatment of pension death benefits

The treatment of death benefits was one of the key aspects of the planned pension reforms which was left unresolved after the initial post-Budget consultation process. The Treasury had said that this was “a complex area and any changes have the potential for unforeseen and unintended consequences” and promised to “confirm its intention at Autumn Statement 2014”.

It was therefore a surprise when the Chancellor made an announcement on pension death benefits in his speech to the Conservative Party conference at the end of September. The Treasury duly issued out a press release, but its contents were far from clear, suggesting that the whole process had been rushed. The intended position for payments of lump death benefits made after 5 April 2015 appears to be as follows:

These proposals only apply to uncrystallised money purchase funds and drawdown funds: they not apply to defined benefit pension schemes, scheme pensions or most types of annuity. On the face of it, their end result is likely to be that pensions will play an even greater part in your estate planning. But given the confusing nature of the announcement, for now it is very much a case of watch this space.

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