Chapter: 2 - Inheritance Tax Mitigation: The Basics

Pensions

2.8.2

The regime introduced from 6 April 2006 to take the place of a good eight or nine different regimes which preceded it, whether retirement annuities or personal pensions, has rather changed the landscape.  This regime is described at 11.2. 

As from 2011/12 Income Tax relief at the marginal rate (ie, up to 50%) is given on pension contributions not exceeding £50,000 gross per annum (subject to transitional relief carry-forward from 2008/09, 2009/10 and/or 2010/11). 

When it comes to drawing benefits, no longer do any funds remaining in the pension pot at age 75 have to be converted into an ‘alternatively secured pension’, if not taken as annuity.   While any funds remaining at death can be used to pay pensions to a surviving spouse/civil partner or financial dependent, residual funds thereafter will attract an Income Tax charge of 55%.