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

Growth Plan maps out £20bn-plus investment journey Mo Isap from the Lancashire Business Board with the plan

Growth Plan maps out £20bn-plus investment journey

18 Sep 2025

2

Post Office future secured as council explores new options Abington Street Post Office

Post Office future secured as council explores new options

17 Sep 2025

3

Airframe Designs supports new defence strategy with pledge to nurture talent Jerrod Hartley

Airframe Designs supports new defence strategy with pledge to nurture talent

17 Sep 2025

4

Fox Group makes second acquisition since Stellex Capital backing Roger Thistlethwaite, managing director NMS Civil Engineering Limited. Paul Fox, CEO Fox Group. John Flood, Executive Director Fox Group

Fox Group makes second acquisition since Stellex Capital backing

17 Sep 2025

5

Villa at Wrea Green bought for £3.6m by Haythornthwaite family The Villa Wrea Green courtesy of The Villa Wrea Green

Villa at Wrea Green bought for £3.6m by Haythornthwaite family

16 Sep 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
LBV124 September/October Launch Event
MBP Arc Cinema Preston Opening 205
Networking
18 Sep 2025

LBV124 September/October Launch Event

The Arc Cinema, Preston, PR1 2BL

08:30 - 10:30

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

Ladies Lunch
Lancs-cham-logo.jpg.jpg
LBV Hub Networking
18 Sep 2025 - 18 Sep 2025

Ladies Lunch

Lancaster Golf Club, Lancaster, LA2 0AJ

12:00 - 16:00

Cumbria Business Expo 2025
https---cdn.evbuc.com-images-880461633-4862066883-1-original.20241022-110415.jpeg.jpg
LBV Hub Exhibitions
19 Sep 2025 - 19 Sep 2025

Cumbria Business Expo 2025

Carlisle Racecourse, Carlisle, CA2 4TS

09:00 - 15:00

Your Business, Your Region: Making sense of devolution and Local Government Reorganisation
Chorley Council breakfast event new
LBV Hub Networking
23 Sep 2025 - 23 Sep 2025

Your Business, Your Region: Making sense of devolution and Local Government Reorganisation

Worden Hall, Leyland, PR25 3DH

08:00 - 11:00

Preston Freelancer Meet-Up: September
Sept Freelancer (1).png.png
LBV Hub Networking
23 Sep 2025 - 23 Sep 2025

Preston Freelancer Meet-Up: September

Society1, Coworking Space, Preston, PR1 3LT

10:00 - 11:30

Speed Networking with BNI
2.png.png
LBV Hub Networking
24 Sep 2025 - 24 Sep 2025

Speed Networking with BNI

Chorley Football Club, Chorley, PR7 3DU

16:00 - 19:00

The Marketing Meetup IRL: Lancashire - September
TMM Lancashire
LBV Hub Networking
25 Sep 2025 - 25 Sep 2025

The Marketing Meetup IRL: Lancashire - September

Chorley, PR7 2SL

18:00 - 20:00

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) drop-in day
MTD drop in session.jpg.jpg
LBV Hub Seminars
25 Sep 2025 - 25 Sep 2025

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) drop-in day

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) drop-in day, Blackburn, BB1 5QB

10:00 - 16:00

The Marketing Metrics That Matter – Sept 25
Metris 25.09.png.png
LBV Hub Seminars
25 Sep 2025 - 25 Sep 2025

The Marketing Metrics That Matter – Sept 25

Door4 Office, Burnley Wharf, Burnley, BB11 1JG

09:00 - 11:00

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

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