Passing on your pension

Passing on your pension

One reason for not using your pension to buy property is that under the new system, pensions have become a great way to pass your wealth on tax-efficiently. At present, if you've used your pension to buy an annuity, it effectively 'dies' when you (and in some cases your spouse) die, while pension pots being used for income drawdown are taxed at 55 per cent on your death.

But after 6 April, if you die before the age of 75, your pension pot can be passed on to your family completely free of tax; and if you die after that age, it can be passed on and the recipient will just pay income tax at their normal rate on any income they take.

If you have other savings - in an Isa, for example - it therefore makes more sense to use that money to fund your property purchase, rather than emptying your pension.

(This article was first published in A Place in the Sun Magazine.)

A Place In The Sun