Drawdown and death benefits from 6 April 2015
Drawdown and death benefits from 6 April 2015

The following Pensions guidance note provides comprehensive and up to date legal information covering:

  • Drawdown and death benefits from 6 April 2015
  • Inheritance tax treatment of undrawn sums on death
  • Treatment of undrawn sums inherited by a dependant, nominee or successor
  • Taking undrawn funds by way of income withdrawal
  • Taking undrawn funds by purchasing a short-term annuity
  • Taking undrawn funds by way of a lump sum
  • Taking undrawn funds by purchasing a lifetime annuity
  • What if an individual dies while in receipt of a short-term annuity with a guaranteed term?
  • What if an individual dies with some unused uncrystallised funds?

Where a member of a registered pension scheme dies while in drawdown (whether in the form of income withdrawal or a short-term annuity), there may be funds remaining in their drawdown pension fund or flexi-access drawdown fund at the time of their death. If so, those funds may either:

  1. form part of the deceased's estate—for information on the inheritance tax treatment of such funds, see: Inheritance tax treatment of undrawn sums on death, below, or

  2. pass on to one or more 'dependants' or 'nominees'. In turn, if a dependant or nominee also dies while in drawdown (eg because they chose to take the funds they inherited by way of drawdown) and they leave behind some undrawn funds, those funds may pass on to one or more 'successors'. For more information, see: Treatment of undrawn sums inherited by a dependant, nominee or successor, below

Legislation also caters for circumstances where a nominee inherits 'unused uncrystallised funds' (ie funds from a pension arrangement which had not been designated as available for drawdown or which had not been allocated to a scheme pension) on the death of a member. In such circumstances, the nominee may choose to take those funds by way of drawdown. For more information on this, see: What if an individual dies with unused uncrystallised funds? below.

For information on drawdown generally, see