It runs in the family

By Mattioli Woods

24 Mar 2015

Under the new pension rules, the door has been fully opened to allow pension death benefits to be passed on to the next generation.

By Taylor Patterson.

Regardless of whether you have started to draw a pension, your remaining pension fund can be passed on tax-free after 6 April 2015, if you die before the age of 75.

The main point to note, is to whom you can choose to leave your pension fund to benefit from these rule changes, is that the term financially dependent has been removed and replaced with the term nominated beneficiary. Your nominated beneficiary(s) can use it to provide a flexible tax-free income or a tax-free lump sum.

If you die on or after the age of 75, nominated beneficiaries will be able to access the pension funds in a flexible manner paying income tax on any withdrawals they make at their marginal rate of income tax. Alternatively it can be taken as a lump sum less 45% tax, dropping to marginal rate of income tax from 2016/17.

Pensions are not normally subject to inheritance tax since they generally fall outside of the estate.

The average life expectancy at age 65 in the UK is 86 for men and 89 for women, so the government estimates most people will survive the age 75 threshold. * Source Office for National Statistics

Taking an example of how the new legislation will work:-

Bill Boots dies with a pension fund of £900,000 at the age of 86 and has 3 children to whom the fund has been left, John, Karen and Paul.

To illustrate the flexibility, as the eldest John is a 40% tax payer and his children have left home. He keeps his share of the fund for himself and decides not to draw on it until he retires. His view is that this will build up a nice tax free fund outside of his estate for his children whilst he still maintains control for a rainy day.

Karen is a stay at home mum and therefore is able to take some income from the pension fund to use up her personal allowance without paying further income tax.

Paul has two children at university, is a 40% taxpayer and therefore decides that if the trustees are in agreement his share should be diverted directly to the children to assist with university fees, allowing them to withdraw the fund at nil rate income tax. The funds that were Bill Boot’s even on this first death post 75 are passed to his family where income is taken tax efficiently either at nil or basic rate income tax. The funds are then available to the nominees successors, as they choose, subject to the tax postion determined by the age of the nominees death. This creates a cascade of wealth through the generations.

Latest news

1

Bellway to build 183 high quality new homes Royal Bowland Park street scene NEW.jpg.jpg

Bellway to build 183 high quality new homes

29 Oct 2025

2

University of Lancashire recognised for entrepreneurship and supporting business growth - Representatives from the University's Business School, local SMEs and the IOEE

University of Lancashire recognised for entrepreneurship and supporting business growth

29 Oct 2025

3

£8bn Typhoon order is great news for Lancashire BAE Typhoon ECRS Mk2 Radar

£8bn Typhoon order is great news for Lancashire

28 Oct 2025

4

Award-winning Lancashire wedding venue and hotel is sold The Mill at Conder Green

Award-winning Lancashire wedding venue and hotel is sold

28 Oct 2025

5

PM+M announces another 19 promotions across the firm PM+M promotions

PM+M announces another 19 promotions across the firm

27 Oct 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
November / December 2025 Magazine Launch Event
Holiday Inn Hotel
Networking
28 Oct 2025 - 18 Nov 2025

November / December 2025 Magazine Launch Event

Holiday Inn, Blackpool

16:46 - 16:45

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

Help to grow management course
Help to grow - barriers to growth.png.png
LBV Hub Seminars
26 Sep 2025 - 16 Dec 2025

Help to grow management course

Preston Campus , Preston , PR1 2HE

09:00 - 15:00

RISE - Lancashire's unique leadership programme for women
thumbnail_Emma Weston Illustration WENDY BOWERS RISE Illustrstion.jpg.jpg
LBV Hub Seminars
22 Oct 2025 - 18 Mar 2026

RISE - Lancashire's unique leadership programme for women

East Lancashire Chamber of Commerce, Clayton le Moors, BB5 5JR

09:30 - 15:30

Women scaling up Blackpool Fylde and Wyre
LBV Hub Seminars
22 Oct 2025 - 09 Jan 2026

Women scaling up Blackpool Fylde and Wyre

The Small Business Academy, Blackpool, FY4 5JX

09:30 - 15:30

Chamber Breakfast Networking – November
Lancs-cham-logo.jpg.jpg
LBV Hub Networking
06 Nov 2025 - 06 Nov 2025

Chamber Breakfast Networking – November

Porsche Centre South Lakes, Carnforth, LA6 1FW

08:30 - 10:30

Lancashire Police business update with The Police and Crime Commissioner
Lancs-cham-logo.jpg.jpg
LBV Hub Roundtables
10 Nov 2025 - 10 Nov 2025

Lancashire Police business update with The Police and Crime Commissioner

Lancaster Castle, Lancaster, LA1 1YN

14:00 - 16:00

Beyond the Brand: Building trust through values and integrity
1.png.png
LBV Hub Networking
11 Nov 2025 - 11 Nov 2025

Beyond the Brand: Building trust through values and integrity

Society1, Coworking Space, Preston, PR1 3LT

18:00 - 20:00

AI, Creativity, and what it means to be human
2.jpg.jpg
LBV Hub Networking
11 Nov 2025 - 11 Nov 2025

AI, Creativity, and what it means to be human

Society1, Coworking Space, Preston, PR1 3LT

18:00 - 20:00

The Business Network Central and East Lancashire
LBV Hub Networking
13 Nov 2025 - 13 Nov 2025

The Business Network Central and East Lancashire

Stanley House, Blackburn, BB2 7NP

11:30 - 14:15

The AI Lab: E-commerce
Ai Lab ecommerce (1).png.png
LBV Hub Seminars
14 Nov 2025 - 14 Nov 2025

The AI Lab: E-commerce

Door4 Office, Burnley Wharf, Burnley, BB11 1JG

09:00 - 11:30

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV124 Online Graphic
Subscribe now

Weekly news bulletin