Why Pensions are Vital to Estate Planning

As pensions can be inherited tax-free, people are increasingly looking to pass on their retirement funds to their spouses or children

James Gard 9 March, 2018 | 10:03AM

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Inheritance tax bands have been adjusted upwards in recent years but they have failed to keep up with house price inflation. Pensions, unlike property, can be inherited tax-free, meaning savers are increasingly looking to pass on their policies.

Company pension schemes, whether defined benefit or defined contribution, have different rules about who can inherit in the event of a scheme member’s death – and how much can be passed on to the next generation. One common misconception is that all inherited pensions, whether cash that has been drawn down, an unused pot or an annuity, are all tax free. If a pension scheme member dies before they are 75, this is generally the case.

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About Author

James Gard  is content editor for Morningstar.co.uk

 

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