Death before 75: annuity income from the spouse's pension tax free

Sterlingtimes

I was surprised to read this in the Daily Mail:

"Also, husbands and wives whose partners die before reaching 75 can now get annuity income from their spouse's pension tax-free."

I had a direct benefit pension that was bought out by Rothesay and became an annuity. My wife takes 50% of my annuity income on my death.

If this were still a direct benefit pension, my wife would be liable for income tax upon my death. But now it is an annuity, does my wife receive the annuity income tax-free if I die before the age of 75?

dunstonh

"Also, husbands and wives whose partners die before reaching 75 can now get annuity income from their spouse's pension tax-free."

Changed to be that way in 2015 with the pension freedoms.
https://www.gov.uk/tax-on-pension-death-benefits

p00hsticks

I'm not sure that the article is referring to inheriting existing DB or annuity pensions - I inagine that will depend on the terms of the individual scheme. If the deceased  has a DC pension pot then I bleeive it can be inherited tax free, and the option exists for a spouse to convert it to an annuity rather than receive it as a lump sum.

Sterlingtimes

dunstonh said:

"Also, husbands and wives whose partners die before reaching 75 can now get annuity income from their spouse's pension tax-free."

Changed to be that way in 2015 with the pension freedoms.
https://www.gov.uk/tax-on-pension-death-benefits

Thank you. So on my first impression looking at the table, now that my previous employer's direct benefit pension has become a personal annuity outside of a scheme, my wife pays no tax on the income if I die before age 75. 

Marcon

Sterlingtimes said:

dunstonh said:

"Also, husbands and wives whose partners die before reaching 75 can now get annuity income from their spouse's pension tax-free."

Changed to be that way in 2015 with the pension freedoms.
https://www.gov.uk/tax-on-pension-death-benefits

Thank you. So on my first impression looking at the table, now that my previous employer's direct benefit pension has become a personal annuity outside of a scheme, my wife pays no tax on the income if I die before age 75. 

No. Your employer's defined benefit scheme has been 'bought out' but different legislation applies where this happens. Spouse's pensions in such cases are still potentially subject to tax, depending on your wife's other income at the time.

Sterlingtimes

Marcon said:

Sterlingtimes said:

dunstonh said:

"Also, husbands and wives whose partners die before reaching 75 can now get annuity income from their spouse's pension tax-free."

Changed to be that way in 2015 with the pension freedoms.
https://www.gov.uk/tax-on-pension-death-benefits

Thank you. So on my first impression looking at the table, now that my previous employer's direct benefit pension has become a personal annuity outside of a scheme, my wife pays no tax on the income if I die before age 75. 

No. Your employer's defined benefit scheme has been 'bought out' but different legislation applies where this happens. Spouse's pensions in such cases are still potentially subject to tax, depending on your wife's other income at the time.

Thank you, Marcon. For a short time, I thought something had fallen out in my favour. Yes, the employer's direct benefit scheme was bought out, and the resultant policy is described as an "annuity". 

coyrls

Sterlingtimes said:

Marcon said:

Sterlingtimes said:

dunstonh said:

"Also, husbands and wives whose partners die before reaching 75 can now get annuity income from their spouse's pension tax-free."

Changed to be that way in 2015 with the pension freedoms.
https://www.gov.uk/tax-on-pension-death-benefits

Thank you. So on my first impression looking at the table, now that my previous employer's direct benefit pension has become a personal annuity outside of a scheme, my wife pays no tax on the income if I die before age 75. 

No. Your employer's defined benefit scheme has been 'bought out' but different legislation applies where this happens. Spouse's pensions in such cases are still potentially subject to tax, depending on your wife's other income at the time.

Thank you, Marcon. For a short time, I thought something had fallen out in my favour.

If you think death before 75 would be in your favour.

Albermarle

dunstonh said:

"Also, husbands and wives whose partners die before reaching 75 can now get annuity income from their spouse's pension tax-free."

Changed to be that way in 2015 with the pension freedoms.
https://www.gov.uk/tax-on-pension-death-benefits

Just looking at that link . It says

Passing on a pension pot you inherited

If you inherit a defined contribution pot you can nominate someone to get any money you do not use before your death. The money must be in a flexi-access drawdown fund when you die.

This could be read as if the pot was still uncrystallised ( ie not in a drawdown fund) then the same rules would not apply.

I presume that is not the case, and it just a matter of the way they have worded it?

p00hsticks

Albermarle said:

dunstonh said:

"Also, husbands and wives whose partners die before reaching 75 can now get annuity income from their spouse's pension tax-free."

Changed to be that way in 2015 with the pension freedoms.
https://www.gov.uk/tax-on-pension-death-benefits

Just looking at that link . It says

Passing on a pension pot you inherited

If you inherit a defined contribution pot you can nominate someone to get any money you do not use before your death. The money must be in a flexi-access drawdown fund when you die.

This could be read as if the pot was still uncrystallised ( ie not in a drawdown fund) then the same rules would not apply.

I presume that is not the case, and it just a matter of the way they have worded it?

I'm not sure but note that that part is referring to passing on a pension pot that you yourself have already inherited from the original person holding the pot, not the initial inheritance. 

Albermarle

p00hsticks said:

Albermarle said:

dunstonh said:

"Also, husbands and wives whose partners die before reaching 75 can now get annuity income from their spouse's pension tax-free."

Changed to be that way in 2015 with the pension freedoms.
https://www.gov.uk/tax-on-pension-death-benefits

Just looking at that link . It says

Passing on a pension pot you inherited

If you inherit a defined contribution pot you can nominate someone to get any money you do not use before your death. The money must be in a flexi-access drawdown fund when you die.

This could be read as if the pot was still uncrystallised ( ie not in a drawdown fund) then the same rules would not apply.

I presume that is not the case, and it just a matter of the way they have worded it?

I'm not sure but note that that part is referring to passing on a pension pot that you yourself have already inherited from the original person holding the pot, not the initial inheritance. 

OK did not notice that . Thanks .