Chancellor Abolishes 55% Tax Rate On Pension Pots

10 November 2014

If an individual dies before they reach the age of 75, they will be able to pass on their remaining pot to anyone completely tax free.

The Chancellor George Osborne has announced that he will abolish the 55% tax rate that currently applies to untouched defined contribution pension pots. The welcome break should encourage the update on pensions. The beneficiary receiving the pension will pay no tax on the money they withdraw from that pension, whether it is taken as a single lump sum or via drawdown.

If the individual who dies is over 75, any nominated beneficiary will be able to access the pension funds flexibly and pay tax at their marginal rate of income tax, as they would with any pension. Beneficiaries of a pension from someone aged over 75 will also have the option of receiving the pension as a lump sum payment, subject to a tax charge of 45%.

The change will apply to all payments made from April 2015 and will mean that pensioners can leave more to the next generation.