Pensions of the deceased received by beneficiaries are generally tax-free if the deceased was under 75. However, in some cases, if there was no nomination made, this could still be taxable. So please ensure your pension nomination is in place.

Inherited defined contribution (DC) pensions that have a drawdown arrangement or have not yet been accessed will face new tax treatment depending on the age of the owner at death.

Death after 75 – the beneficiary pays income tax on the pension at their marginal rate. Funds can be accessed in any way, including lump sum payments, with any income or payments option which will be taxed at the recipient’s marginal rate of income tax when the pension income is added on top of any other income they receive, e.g., 20%, 40% or 45%.

Death before 75 – DC pension pots can be passed on tax-free (if there is a nomination), whether they are in a drawdown account or untouched (provided they are taken as lump sums or taken via a flexible drawdown arrangement).

The new rules will not apply to annuities or scheme pensions.

On another note, if you are a resident in Spain, turn 55 and withdraw 25% of your pension. If you are a UK resident, there is no tax to pay; if you are a resident in Spain, this is taxable!

We are able to pass you the details of an IFA, who will be able to help.