The government is to abolish the 55% pensions death tax charge and the measure will come into force in April 2015 alongside the other pension reforms outlined in the Budget.
The new rules means that if a person who dies is 75 or over, beneficiaries will only pay their marginal tax rate on drawdowns from the pension.
When an individual under the age of 75 dies they will be able to give their pension pot to any beneficiary tax free, including if the pension is already in drawdown. There will be no tax when the pension is passed on, and the beneficiary will not have to pay income tax on the money they withdraw from the pension.
Beneficiaries will be able to access pension funds at any age and the lifetime allowance, currently £1.25 million, will still apply.
Although the new rules come into force in April 2015, beneficiaries of anyone who dies before that date can still benefit so long as payment is delayed until after that point.
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