Often when considering our finances, we think of those who we will leave behind when we pass away, and what we can do to ensure they are supported. In later life, often one of the greatest assets you can pass on to your beneficiaries is your pension and depending on the age of which you pass away, you can do so tax-free with drawdown.
Why is this specific to drawdown?
Unless you have taken out specific death benefits as part of a lifetime annuity, you can not pass on any of that income when you pass away; this is because your pension savings were used to purchase a guaranteed income. Drawdown, however, gives you the ability to pass on your remaining fund as standard, and at no cost to you or your beneficiaries.
What happens to my fund when I pass away?
When you pass away your remaining drawdown fund is paid to your beneficiaries in full, not only that but it is outside of your estate and therefore is not subject to any applicable inheritance tax. Your beneficiaries can choose to take the fund as a lump sum or have it remain in drawdown and take income when required or regularly.
If you pass away before the age of 75, your beneficiaries will receive the fund tax-free regardless of how they choose to take it. If you pass away after your 75th birthday, then they will be taxed at their marginal rate.
If you have any questions or concerns regarding passing on your pension or the tax implications it may have for your beneficiaries your My Pension Expert IFA will be more than happy to cover this as part of their ongoing advice.