Your new pension will offer a full return of the pension value on death. Changes introduced in April 2015 mean that when an individual under the age of 75 dies, they will be able to give their pension pot to any beneficiary tax free including if the pension is already in drawdown. Providing that the pension is transferred or designated within two years of your death, the inheritance will be tax-free and the beneficiary will not have to pay income tax on the money they withdraw from the pension. If the beneficiary chooses to take the benefit as a lump sum, but do not claim it within the two-year period, then they will pay income tax on the benefit.
Those aged 75 and over, who haven’t yet started their pension, or are taking a drawdown pension will be able to pass on the remaining pension (subject to policy terms) to a beneficiary. The beneficiary will pay tax on any income or lump sum taken from the pension at their marginal rate of income tax.
You should complete a nomination of beneficiary form to ensure your pension is left to those you wish to benefit. We also recommend you maintain a valid will and that this is kept under review and updated in line with your changing financial situation.