City Trustees - part of Mattioli Woods



News and Media

05 December 2014

Autumn Statement 2014: changes to annuities and abolition of 55% pensions death tax charge

The autumn statement set out the next stage of the Government's long-term economic plans. Amongst other things, the statement reaffirmed the newly, highly favourable tax position in relation to inheritance of pension assets.

Delivering the annual Autumn Statement to Parliament, Osborne reconfirmed the 55% death tax that currently applies when a person dies will be abolished, and also went further to confirm people who die before the age of 75 with a joint life or guaranteed term annuity can pass on future payments tax free.

Commenting on the news, Ed Carey, Managing Director, said:

"The statement has reaffirmed the new, highly favourable tax position in relation to the inheritance of pension assets, which we very much welcome. Changes stated will allow more flexibility for people to further invest into their retirement pots, and will offer increased opportunities to develop funds for investment in a more favourable tax environment."

As always, the devil will be in the detail. Our technical teams will be reviewing the Autumn Statement in full. For more information on the changes, please do not hesitate to contact us directly.

Autumn Statement - Pensions at a glance

Pension death benefits

From April 2015 individuals can pass on their unused defined contribution pension benefits to any beneficiary. If the individual dies before age 75, the beneficiary will pay no tax on the funds. If they die after age 75, funds paid as drawdown will be taxed at the recipient's marginal rate of income tax or if taken as a lump sum payment these will be taxed at 45%. From April 2016 lump sum payments will also be taxed at the recipient's marginal rate.

Pension tax relief

The age 75 rule

Following informal consultation since the Budget 2014 the Government has decided not to make any changes to the age limit at which tax relief can be claimed on pension contributions. Therefore, any contributions made after age 75 will not receive tax relief in line with the current regulations.

Annuities

In addition to the relaxed tax rules surrounding death benefits made from money purchase arrangements, the Government has also decided that from April 2015 beneficiaries of individuals who die under the age of 75 with a joint-life or guaranteed term annuity will be able to receive any future payments from such policies tax-free. The tax rules will also be changed to allow joint-life annuities to be passed on to any beneficiary.

 

 

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