Another major change is the treatment of the pension fund on death. Currently the whole of the fund can pass to the spouse or a trust without any tax providing you were under 75 at the time of death and you had not taken any benefit. Once you had taken benefi then the spouse could take income from the fund at their marginal rate or take cash less 55% tax charge.
Pension benefis do not count towards the IHT calculation.
From 6th April 2015 if you die before age 75 irrespective of whether you have taken benefi or not the fund is passed to the nominated benefiiary and they can take tax free withdrawals. This could be as a lump sum or they could retain it in the tax effiient pension fund and withdraw as a tax free income overtime. This can be used for IHT purposes as the benefiiary could be child or grandchild. It is important that a benefiiary is nominated and careful thought needs to be taken as to who you wish to benefit.
Death after age 75 sees a reduced tax charge to 45% of the fund from 6th April 2015 but will eventually be taxed at the beneficiaries marginal rate by tax year 2016/17.
The table below provides a useful summary;