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Inherited pension and its tax free status

Aged
Aged Posts: 483 Forumite
Part of the Furniture 100 Posts Name Dropper Photogenic
in Savings & investments
If a person has inherited a pension from someone under 75 (and hence withdrawals can be made free of income tax), is it a simple matter to transfer the funds in drawdown to another pension provider without losing the tax free status?
«1

Comments

  • dunstonh
    dunstonh Posts: 121,352 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    If the fund is accepted as a tax free lump sum then it ceases to be within a pension. Effectively, a cheque turns up for the lump sum.

    It can be reinvested into pension subject to annual allowance and income.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Aegis
    Aegis Posts: 5,695 Forumite
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    Aged wrote: »
    If a person has inherited a pension from someone under 75 (and hence withdrawals can be made free of income tax), is it a simple matter to transfer the funds in drawdown to another pension provider without losing the tax free status?
    In theory, this should be fine. In practice none of my clients have actually died since this law came into effect, so I have no experience of actually transacting this yet and can't comment on the specifics.
    I am a Chartered Financial Planner
    Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.
  • Aged
    Aged Posts: 483 Forumite
    Part of the Furniture 100 Posts Name Dropper Photogenic
    dunstonh wrote: »
    If the fund is accepted as a tax free lump sum then it ceases to be within a pension. Effectively, a cheque turns up for the lump sum.

    It can be reinvested into pension subject to annual allowance and income.
    No it hasn't been accepted as a tax free lump sum, it's been transferred into a drawdown account.
  • xylophone
    xylophone Posts: 45,983 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    http://www.hl.co.uk/pensions/drawdown/what-happens-when-i-die
  • dunstonh
    dunstonh Posts: 121,352 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Aged wrote: »
    No it hasn't been accepted as a tax free lump sum, it's been transferred into a drawdown account.

    Any reason why that method was chosen?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Aged
    Aged Posts: 483 Forumite
    Part of the Furniture 100 Posts Name Dropper Photogenic
    dunstonh wrote: »
    Any reason why that method was chosen?
    Beats me, but we are where we are :undecided
  • TH1878
    TH1878 Posts: 458 Forumite
    dunstonh wrote: »
    Any reason why that method was chosen?

    Why would you not choose this option? You can take 100% of the fund as income anyway but it allows the beneficiaries full flexibility to choose.
  • TH1878
    TH1878 Posts: 458 Forumite
    Aged wrote: »
    If a person has inherited a pension from someone under 75 (and hence withdrawals can be made free of income tax), is it a simple matter to transfer the funds in drawdown to another pension provider without losing the tax free status?

    Yes. The transfer does not affect the tax status although you need to check with the provider to ensure they can facilitate it.

    http://www.hmrc.gov.uk/manuals/ptmanual/ptm104000.htm
  • Aged
    Aged Posts: 483 Forumite
    Part of the Furniture 100 Posts Name Dropper Photogenic
    TH1878 wrote: »
    Yes. The transfer does not affect the tax status although you need to check with the provider to ensure they can facilitate it.

    http://www.hmrc.gov.uk/manuals/ptmanual/ptm104000.htm

    Thank you, that's exactly the sort of thing I was looking for.
  • Aged
    Aged Posts: 483 Forumite
    Part of the Furniture 100 Posts Name Dropper Photogenic
    edited 18 November 2015 at 10:28PM
    So, if you wanted to consolidate more than one inherited drawdown fund, you would need firstly to set up a new drawdown account, then get the provider to effect the transfer of funds from the existing accounts? Anyone?
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