PTM072440 - Death benefits: Types of pension: beneficiary's flexi-access drawdown from 6 April 2015: Where a dependant had designated funds in an arrangement into a dependant鈥檚 flexible drawdown pension fund before 6 April 2015
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Glossary |
Automatic conversion to flexi-access drawdown fund
Taxation
Automatic conversion to flexi-access drawdown fund
Paragraphs 22A(1)(b) Schedule 28 Finance Act 2004
A 诲别辫别苍诲补苍迟蝉鈥� drawdown pension fund that immediately before 6 April 2015 could pay flexible drawdown pension (see PTM072330) automatically converted into a dependant鈥檚 flexi-access drawdown fund on 6 April 2015.
Any further designations of sums or assets for drawdown on or after 6 April 2015 under the arrangement holding this drawdown fund will go into the flexi-access drawdown fund.
From 6 April 2015 therefore, drawdown pension can continue to be taken from the arrangement in line with the guidance on flexi-access drawdown pensions at (PTM072430).
Taxation
Sections 579A , 579CZA(1) and(5)聽 and 646C(1) and (5) Income Tax (Earnings and Pensions) Act 2003
This section of the guidance relates only to dependant鈥檚 drawdown pension paid from a dependant鈥檚 flexi-access drawdown fund that was created by the conversion of a 诲别辫别苍诲补苍迟蝉鈥� flexible drawdown pension fund.聽
Dependants鈥� drawdown pension can be paid as income withdrawal or short-term annuity.聽 The tax treatment for each form of 诲别辫别苍诲补苍迟蝉鈥� drawdown pension is not the same after 5 April 2015.聽
Where the dependant鈥檚 drawdown pension is taxable, it is taxable as the dependant鈥檚 pension income.聽 The pension payer should operate PAYE on the pension.
Taxation of 诲别辫别苍诲补苍迟蝉鈥� income withdrawal
Sections 579A and 579CZA(1) and(5) Income Tax (Earnings and Pensions) Act 2003
Dependants鈥� income withdrawal paid on or after 6 April 2015 will be taxable if:
- it is paid in respect of a member who was aged 75 or older when they died, or
- any payment of depedants' drawdown pension (either as income withdrawal or short-term annuity) was made before 6 April 2015 by, or in respect of, the 诲别辫别苍诲补苍迟蝉鈥� flexible drawdown pension fund.
Dependants鈥� income withdrawal paid on or after 6 April 2015 will be tax free if:
- it is paid in respect of a member who was aged under 75 when they died, and
- before 6 April 2015 no payment of depedant's drawdown pension (either as income withdrawal or short-term annuity) was made by or in respect of the 诲别辫别苍诲补苍迟蝉鈥� flexible drawdown pension fund.
Taxation of 诲别辫别苍诲补苍迟蝉鈥� short-term annuity
Sections 579A and 646C(1) and (5) Income Tax (Earnings and Pensions) Act 2003
Dependants鈥� short term annuity paid on or after 6 April 2015 will be taxable if it is paid in respect of a member who:
- was aged 75 or older when they died, or
- died before 3 December 2014 at any age.
Dependants鈥� short term annuity paid in respect of a member who died on or after 3 December 2014 aged under 75 will be taxable if before 6 April 2015 any of the following payments were made:
- Dependants鈥� income withdrawal from the 诲别辫别苍诲补苍迟蝉鈥� flexible drawdown pension fund
- Dependants鈥� short-term annuity that purchased using funds held under the 诲别辫别苍诲补苍迟蝉鈥� flexible drawdown pension fund
- Dependants鈥� annuity that purchased using fund held under the 诲别辫别苍诲补苍迟蝉鈥� flexible drawdown pension fund.
Dependants鈥� short term annuity paid on or after 6 April 2015 will be tax free if:
- it is paid in respect of a member who died on or after 3 December 2014 aged under 75, and
- before 6 April 2015 the 诲别辫别苍诲补苍迟蝉鈥� flexible drawdown pension fund was not used to pay 诲别辫别苍诲补苍迟蝉鈥� income withdrawal or purchase a 诲别辫别苍诲补苍迟蝉鈥� short-term annuity (or 诲别辫别苍诲补苍迟蝉鈥� annuity) contract that made payments before 6 April 2015.