View more on these topics

Govt ‘death tax’ reforms allow unlimited pensions inheritance

The Government has confirmed reforms to “death tax” rules will allow savers to pass pension wealth down through generations of people indefinitely.

Amendments to the Taxation of Pensions Bill published today confirm savings can be passed down through “successors”. There had been concerns the Government could legislate so that on the “second death”, a beneficiary might have to cash out the pension and be taxed at 55 per cent.

But MGM Advantage pensions technical director Andrew Tully says the changes published today mean a member will be able to pass their drawdown fund onto a nominee, who in turn can leave unspent pensions to successors.

A successor can be nominated by a dependent of the member, a nominee of the member, a successor of the member, or by the scheme administrator.

Tully says: “That successor can then pass onto another successor, and so on and so on. So we have a cascading of wealth down through the generations in a very tax efficient way. It’s a bonus for people who are wealthy and have lots of pension savings.”

However, the amendments do not mention how annuities will be treated under the new system. Following the announcement of the changes to the death tax in September, Money Marketing revealed that value-protected annuities would benefit from the tax cut in the same way as savings held in drawdown arrangements. 

At the Conservative Party conference Chancellor George Osborne announced the 55 per cent charge levied on defined contribution pension pots would be removed if the saver dies before the age of 75. After that age, savings will be taxed at the marginal rate of the dependent if taken as income, or taxed at 45 per cent if withdrawn as a lump sum.


News and expert analysis straight to your inbox

Sign up


There are 6 comments at the moment, we would love to hear your opinion too.

  1. Until the next Government comes along and changes the rules and grabs the money!!!
    And then turns round and blames the Financial Services Industry!
    Been there, done that!

  2. Sounds too good to be true, and will be if Labour get in.

  3. “However, the amendments do not mention how annuities will be treated under the new system.” Tough. You poor people have lost your money to a combination of life offices and strangers – unless, of course Steve Webb gets his way and rights the wrongs. What I would like to see is a review of all those annuities where drawdown was an option. That is, pension pots of £20,000 or more. Let’s ask the people. Did you know drawdown was available? Let’s see who is to blame for this debacle. Let’s have a light shining on this.

  4. Sounds too good to be true, and will be if Labour get in.

  5. I proposed this years ago and even wrote to the Treasury about it. Maybe they took notice after all, in spite of a discouragingly non-committal response at the time.

  6. This is what should have been done in the first place. The main point against pension for the basic rate tax payer with no employer contribution was that they could not live long enough to justify making pension contributions. allowing pensions to be passed on gets over this. so why spoil everything by allowing people to cash our entirely ? Pensions are supposed to provide and income not to be ways of allowing higher rate tax payers to screw basic rate payers. A future government will need to address this and reverse the option to fully access funds. Hope they have the sense to allow pension inheritance though.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm