Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • September 2014
09

Osborne to scrap 55% tax rate on untouched pension pots

Open-access content Monday 29th September 2014

George Osborne is set to abolish the 55% tax duty paid on the undrawn pensions of the deceased from next April.

2

Speaking at the Tory conference today, the chancellor said he would axe what he called the 'death tax' that is levied when those aged 75 or over pass on untouched defined contributions on a pension pot to dependents, and to pensions already in a drawdown account.

Beneficiaries will now only pay the marginal income tax rate, or no tax at all if the individual dies before they reach 75, if it is in a drawdown account or uncrystallised.

The Treasury predicts that this policy is expected to cost around £150m per year.

In a Tweet, Osborne said: 'Next stage in pension reforms is abolishing death tax on pensions so people who've worked hard and saved can pass their pension on tax free.'

The idea was proposed in July, when the Treasury launched its Freedom and choice in pensions consultation. 

Tom McPhail, head of pensions research at Hargreaves Lansdown, said the changes to the tax rules would be a 'mixed blessing'.

He said: 'They will encourage investors to take the maximum possible advantage of their pension contribution allowances, which is certainly a good thing. Investors can build up their pension fund, secure in the knowledge that they can not only draw on their savings without restriction from age 55 but in addition, any unused savings can be passed on to their inheritors tax free on death.

'It is therefore likely to significantly boost demand for income drawdown in retirement and to diminish the relative attraction of annuities. It will also encourage investors to preserve their pension funds to meet the cost of care funding.'

Yvonne Braun, assistant director and head of savings, retirement & social care at the Association of British Insurers, said the tax change was 'a sensible move which deserves support'.

'A 55% tax charge if someone dies before they have accessed their pension fund goes against the grain of the wider government policy of making pension saving more popular by giving people more options on how to use their retirement savings,' she said.

Actuaries Barnett Waddingham said the proposed abolition of the 'hefty' 55% tax charge was 'extremely good news' and would 'surely be welcomed'.

Malcolm McLean, a senior consultant said at the firm, said: 'In an ideal world all tax charges on pension funds inherited on death would be abolished without a distinction between those aged under and over 75, or at least would only apply where the death occurred at a later age than 75.

'Under the circumstances, however, the chancellor has probably gone further than many in the pensions industry expected and is to be commended for making the changes he has now announced.'

This article appeared in our September 2014 issue of The Actuary.
Click here to view this issue
Filed in
09
Topics
Pensions

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

New Fast-Growing Team - Actuarial Systems Development

London (Greater)
Excellent Salary Package
Reference
143762

Actuarial Pension Consultant – Scotland/Remote – Up to £90,000 plus bonus

Edinburgh / Glasgow / Remote working
Up to £90,000 + Bonus
Reference
143761

Part Qualified Pensions Actuary– Specialised Pensions Consultancy - Scotland/Remote - Up to £70,000

Edinburgh / Glasgow / Remote working
Up to £70,000 + Bonus
Reference
143760
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ