Chancellor George Osborne has set out changes to cut the 55% ‘death tax’ charge on pension savings. From April 2015, beneficiaries of those with a drawdown arrangement who die before age 75 will be entitled to receive the deceased member’s pension pot as a tax free lump sum.
Chancellor George Osborne has set out changes to cut the 55% ‘death tax’ charge on pension savings. From April 2015, beneficiaries of those with a drawdown arrangement who die before age 75 will be entitled to receive the deceased member’s pension pot as a tax free lump sum. For members’ deaths after age 75, the beneficiary will pay income tax at the marginal rate applying when withdrawals are made from the fund.
The proposals, which were announced at the Conservative Party conference on Monday, were welcomed by advisers. Lesley Browning (Norton Rose Fulbright) said: ‘This follows the measures announced in the Budget earlier this year, which together will mark a fundamental shift in the tax regime applicable to pension savings – potentially allowing individuals significantly more freedom in how they use their pension funds. As is normal for changes of this nature, their long term impact will be hard to measure immediately.’
Patrick Van de Steen (specialist pension provider Hornbuckle) said: ‘The chancellor’s decision to cut the 55% lump sum death benefits tax charge is very welcome news for pension savers. Equally welcome is the extension of the right to draw a pension income to all beneficiaries, not just the individual’s financial dependants – it removes a big hurdle to pension saving and will encourage individuals to consolidate non-pension with pension savings to make the best use of the new flexibility.’
The chancellor also announced that should the Conservatives be re-elected the party would freeze benefits paid to people of working age for two years from 2016. The freeze would include jobseeker's allowance, income support, child tax credit and working tax credit, child benefit and employment support allowance paid to those judged capable of work but it would not affect pensions, disability benefits and maternity pay.
Chancellor George Osborne has set out changes to cut the 55% ‘death tax’ charge on pension savings. From April 2015, beneficiaries of those with a drawdown arrangement who die before age 75 will be entitled to receive the deceased member’s pension pot as a tax free lump sum.
Chancellor George Osborne has set out changes to cut the 55% ‘death tax’ charge on pension savings. From April 2015, beneficiaries of those with a drawdown arrangement who die before age 75 will be entitled to receive the deceased member’s pension pot as a tax free lump sum. For members’ deaths after age 75, the beneficiary will pay income tax at the marginal rate applying when withdrawals are made from the fund.
The proposals, which were announced at the Conservative Party conference on Monday, were welcomed by advisers. Lesley Browning (Norton Rose Fulbright) said: ‘This follows the measures announced in the Budget earlier this year, which together will mark a fundamental shift in the tax regime applicable to pension savings – potentially allowing individuals significantly more freedom in how they use their pension funds. As is normal for changes of this nature, their long term impact will be hard to measure immediately.’
Patrick Van de Steen (specialist pension provider Hornbuckle) said: ‘The chancellor’s decision to cut the 55% lump sum death benefits tax charge is very welcome news for pension savers. Equally welcome is the extension of the right to draw a pension income to all beneficiaries, not just the individual’s financial dependants – it removes a big hurdle to pension saving and will encourage individuals to consolidate non-pension with pension savings to make the best use of the new flexibility.’
The chancellor also announced that should the Conservatives be re-elected the party would freeze benefits paid to people of working age for two years from 2016. The freeze would include jobseeker's allowance, income support, child tax credit and working tax credit, child benefit and employment support allowance paid to those judged capable of work but it would not affect pensions, disability benefits and maternity pay.
