Osborne abolishes 55% pensions death tax

Currently, when you die there is a tax of 55% that applies to ‘defined contribution’ pension pots left by those aged over 75, or for younger people “in drawdown”  who have accessed the tax free cash lump sum from their pension funds.  Today George Osborne announced the government’s intention to remove this tax as from April 2015 and replace it with a fairer rate of tax based on the beneficiary’s marginal tax rate.    Analysts believe that this move by the government is an effort to appeal to savers who have been hit hard by low interest rates. Either ways, 320,000 people are expected to benefit!

The good thing for investors is that you can build up your pension fund, with the reassurance that you can easily draw on your savings without restriction from age 55 and any unused savings can be passed on to your loved ones tax free on death.

Director of Searchlight, Richard Pipe comments:  “This is most welcome news as we have always considered the 55% tax rate to be too high.  This is another positive change for pensions, sweeping away one of the perceived negatives of “drawdown” pensions.  However, the speed of change and the complexity of the new rules effective from April 2015 means that it is more important than ever for people to seek advice on their pension options. ”


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