Likewise where monies are withdrawn and retained in the hands of the investor, there may be tax implications. If the pension holder is over the age of 75 upon death withdrawals from the inherited pension, whether on a regular basis or as a lump sum, will be taxed at the recipient’s relevant income tax rate.Īs pensions are generally written under Trust they do not usually form part of an individual’s estate for Inheritance Tax (IHT) purposes meaning the new rules provide an advantageous route for passing on wealth to the next generation and beyond.Īny monies withdrawn from the inherited pension pot and not spent will form part of the beneficiary’s estate for Inheritance Tax purposes. Now if a pension holder dies before the age of 75, they can pass their pension pot on to their chosen beneficiaries without any tax implications (subject to available lifetime allowance). Here we take a closer look at death benefits, how the changes apply in different scenarios and the more technical aspects of nominating beneficiaries.Īs of 6 April 2015 the 55% death tax payable on crystallised drawdown pension pots was scrapped. The most significant change the legislation brought about was in relation to death benefits. Changes to legislation have undoubtedly provided more choice along with potential benefits, depending on how an individual plans to use their pension fund. ‘Pensions Freedom’ has now been in place for well over 12 months.
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