The extra freedom granted by the pension changes introduced in April 2015 is good news for all pension savers. However, the increased options could lead to many people making the wrong decisions and paying unnecessary tax, making professional financial advice all the more important.

In the event of your death, the money and estate that is left behind for your loved ones may be subject to tax and the amount of tax they may have to pay can be quite complex to work out. The government have provided the table below to give a bit more of an understanding on these payments.

In many cases, if you, unfortunately, die before you are aged 75, you may be able to leave your residual pension savings to your beneficiaries as a lump sum or regular income without any tax being payable.

If you die aged 75 and above, any tax payable is dependent on your beneficiaries’ rate of income tax and how they access the money.

Tax your beneficiary pays

InheritanceYour age when you dieTax they pay
Unused cash you took from your potAny ageInheritance Tax based on the size of your estate
Money still in your potUnder 75Zero, if they take it within 2 years
Money still in your pot75 or olderIncome Tax
Adjustable incomeUnder 75Zero
Adjustable income75 or olderIncome Tax
Joint, guaranteed period or capital protected annuityUnder 75Zero
Joint, guaranteed period or capital protected annuity75 or olderIncome Tax


If your beneficiaries choose to leave the pension fund invested and access the money as and when they need it, they will only pay tax on the amount they access, at that time, at their current income tax rate.

This means, with careful financial planning, the tax paid by them can be minimised.

However, it is vital that you review your existing pension plans. Many will not offer the flexibility introduced in April 2015 and your beneficiaries may not benefit from these.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.