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Death benefits and your pension

By July 21, 2016February 12th, 2019No Comments

Some important changes

In April 2015 there were some significant changes regarding the treatment of death benefits for personal pensions. The changes were about who could receive your pension fund on death and how it might be taxed on your death.

The restriction that income can only be paid to a ‘dependant’ no longer applies. Where someone has been nominated as beneficiary by the plan holder they can receive pension benefits.  This means that any beneficiary can elect to take an income (including in the form of drawdown) as well as a lump sum, subject to the provider making Flexi Access Drawdown (FAD) available.

It’s worth checking what options your current pension provider will allow on your death, some are more flexible than others. An advantage of a beneficiary taking drawdown is that on their death any remaining funds may be passed on to further nominated beneficiaries. This makes it possible to continue passing on the fund until it eventually runs out.

When was the last time you reviewed the death benefits of your personal pension plan?

Your pension provider should allow you to nominate beneficiaries at any time.  It is advisable to review your expression of wish (nomination) regularly, and to make fresh nominations as your circumstances change.

A nomination is not usually legally binding; however it does make your pension scheme aware of your wishes. It is possible to nominate more than one beneficiary, and decide in what proportion you want each to benefit.

What are the tax charges on pre-retirement or drawdown pension funds?

How can your pension be passed on? If you die before age 75 If you die on or after age 75

Lump sum


Free of income tax


Taxed as income*


Free of income tax via an annuity or drawdown (both options available to any dependant or nominated beneficiary)

Taxed as income* via an annuity or drawdown (both options available to any dependant or nominated beneficiary)

*Income is taxed at the beneficiary’s/beneficiaries’ rate of income tax.

If you have any questions about the death benefits of your pension or would like to discuss any other financial planning matter, then please do contact your Cullen Wealth consultant.