IFAs urged to warn clients of new death benefit tax trap

Before the government removed compulsory annuitisation at age 75, the tax on death benefits from undrawn pension funds when death occurred after 75, was 70% (or 82% with IHT). For deaths occurring before 75, the tax was 35%. Now the tax on death benefits from undrawn pension funds is 55% regardless of what age the investor died. This means for some clients, the tax liability has fallen from 70% to 55%, but for others who may die before 75, it has actually increased from 35% to 55%, Tully said. Tully explained IFAs may fall into the trap of leaving clients younger than 75 in drawdow...