Kevin Read warns that we may be heading for very high tax charges on undrawn pension funds.
It is standard inheritance tax (IHT) planning to write death benefits payable from money purchase (defined contribution) pension schemes into trust for one or more nominated beneficiaries (usually family members). Under current rules, this puts them outside the IHT net if the policyholder dies.
At the Chancellor’s Budget on 30 October 2024, the government announced the intention to remove this IHT exemption from 6 April 2027.
NB. These changes will have no effect on defined benefit (e.g., final salary) pension schemes.
Pension death benefits
Under pension tax rules:
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if the deceased was aged 75 or over, any benefits drawn are fully taxable at the recipient’s marginal income tax rate; or
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