Treasury publishes proposed changes to tax charges on lump sum death benefits

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The Treasury in September 2014 previously announced that changes would be made to the current 55% tax charge that applies when some lump sum death benefits are paid from a registered pension scheme to a member’s estate.

The Treasury’s briefing note “removal of the 55% tax on passing on pensions at death”, confirms the Treasury’s September announcement. In particular, from April 2015 where lump sum death benefits are paid to the member’s estate, some lump sum death benefits will attach zero tax, where the member dies prior to age 75, and taxed at 45% or the deceased member’s marginal rate of tax from 2016/17 tax year, if the member dies aged 75 or older.

It is important to note the Treasury’s briefing note is subject to final legislation and guidance. It is understood the Treasury plans to have discussions with HMRC and industry stakeholders before finalising the legislation in respect of the above.