Widowers will no longer have to pay income tax on joint-life annuity payments under proposals widely expected to be unveiled by Chancellor George Osborne this week.
In his speech at the Conservative party conference in September, the Chancellor announced the 55 per cent tax on unspent pensions on death would be abolished.
Under the proposals, there will be no tax due on inherited pots if the member dies before the age of 75, while after 75 savings will be taxed at beneficiaries’ marginal rate if taken as income or at 44 per cent if taken as a lump sum.
The announcement on the tax changes caused insurers’ share prices to dip as the move was seen to be favouring drawdown over annuities.
Money Marketing subsequently revealed how value protected annuities were to be included in the changes, but that conventional annuities would miss out. The decision caused experts to question the future of annuities given the clear tax advantage the Treasury had handed to drawdown products.
However, several national newspapers reported Osborne will extend the death tax reforms to joint-life annuities in his Autumn Statement on 3 December
The expected rebalancing of the tax status of the two pension products has been widely welcomed by the industry.
Legal & General pensions strategy director Adrian Boulding said the move would be “very good news” for both savers and the industry.