You may have heard the Chancellor propose the removal of the whopping 55% tax charge applied to pensions on death. Sounds good…but what does it mean?
Currently what happens to pensions when you die is very complex. It depends on how old you are and if you have drawn income from your pension. The worse position is a tax charge of 55% levied on your pension fund if you pass it on.
Under the proposals, those with defined contribution schemes who die before age 75 will be able to pass on their pension pot tax free. If the deceased is over 75 a tax charge may still arise but at a lower rate.
The new rules are expected to take effect from April 2015. Speak to your pensions advisor for further details.