Chancellor George Osborne has set out a number of changes today to cut the 55% death tax charge on pension savings. 
September 2014. The new rules will mean that if someone dies at the age of 75 or over a beneficiary will only pay their marginal rate of tax on drawdowns from the pension. For someone who dies under the age of 75 their pension pot can be passed on to a beneficiary tax free and that beneficiary will not have to pay income tax on the money they withdraw.
| Now | April 2015 | 2016/17 Tax Year | |
| Death before age 75 – uncrystallised | Tax-free lump sum to any beneficiary, or dependant’s pension taxed as income | Tax-free lump sum to any beneficiary, or tax-free flexi-access drawdown to any beneficiary | |
| Death before age 75 – crystallised | Lump sum to any beneficiary at 55% tax, or dependant’s pension taxed as income | Tax-free lump sum to any beneficiary, or tax-free flexi-access drawdown to any beneficiary | |
| Death after age 75 – uncrystallised | Lump sum to any beneficiary at 55% tax, or dependant’s pension taxed as income | Lump sum to any beneficiary at 45% tax, or pension income to any beneficiary taxed at marginal rate | Lump sum or pension income to any beneficiary taxed at marginal rate |
| Death after age 75 – crystallised | Lump sum to any beneficiary at 55% tax, or dependant’s pension taxed as income | Lump sum to any beneficiary at 45% tax, or pension income to any beneficiary taxed at marginal rate | Lump sum or pension income to any beneficiary taxed at marginal rate |
Patrick Van de Steen, Managing Director and Head of Proposition at Hornbuckle, commented on what these changes mean for pension saving.“The Chancellor’s decision to cut the 55% lump sum death benefits tax charge is very welcome news for pension savers. Equally welcome is the extension of the right to draw a pension income to all beneficiaries, not just the individual’s financial dependants. It removes a big hurdle to pension saving and will encourage individuals to consolidate non-pension with pension savings to make the best use of the new flexibility.“The reform of death benefits could go further in due course. It would be in the spirit of personal responsibility and choice embodied in the April 2015 changes if an individual could make a binding nomination as to who should receive their remaining pension benefits, without the imposition of an IHT charge. Such an exemption would help to expedite the payment of death benefits during a period when the financial burden on a beneficiary is likely to be most acute.”Main Inheritance Tax page,