Chancellor confirms plans to scrap pensions death tax

Osborne-George-2013

Autumn Statement 2014: From April 2015, beneficiaries of individuals who die before the age of 75 with remaining uncrystallised or drawdown defined contribution pension funds, or who have a joint life or guaranteed-term annuity, will be able to receive any future payments from these policies tax free.

These changes, which will apply to where no payments have been made to the beneficiary before 6 April 2015, were originally announced by Chancellor George Osborne (pictured) on 29 September 2014.

This equalisation of ‘death taxes’ for annuities and income drawdown means more people can take advantage of annuity risk sharing.

Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “Confirmation that death benefits paid from annuities will enjoy the same tax treatment as income drawdown is a welcome equalisation of the new rules.

“It means investors will not be penalised for selecting the security and efficiency which an annuity offers.

“This will no doubt be a disappointment to any widow or widower who is already receiving a survivor’s pension and who will not benefit from the new tax exemption, however, it would have been a breach of accepted protocol if this tax break had been made retrospective.”