“The proposed laws mean that from 6 April 2015 nominees and successors will be able to receive an annuity from a money purchase pension scheme. They will be taxed and paid on a similar basis to how death benefits are received from other pensions. Prior to this legislation only dependants could purchase an annuity following the death of a pension scheme member and non-dependent beneficiaries faced more limited options,” says Gareth James, Technical Resources Manager, AJ Bell. “Pensions holders will have to carefully nominate who inherits, via a correctly completed form, while the beneficiaries will need to assess the merits of an annuity against the alternatives, especially if the Government goes ahead with plans to allow holders of annuities to sell them for cash, should they be unhappy with the returns on offer.”
Notes for Editors
- Since last March's Budget, the Government has outlined a series of pension reforms which are due to come into force from 6 April 2015.
- The new rules widen the range of beneficiaries who can receive death benefits as a pension beyond dependants. Nominees and successors will also have this option.
- Under the new rules, annuities will be able to decrease as well as increase. The current 10-year guarantee period for the payment of the annuity after the pension holder's death will be removed. It will instead continue for any period as set out in the original annuity contract.
- The Government is also investigating plans to let pension holders sell their annuity in exchange for a cash lump sum.