Income Tax (Earnings and Pensions) Act 2003 section 579CZA

Exemption for beneficiaries' income withdrawal in some cases

Section 579CZA provides an income tax exemption for drawdown pension payments received by the dependants, nominees or successors of a deceased pension scheme member, provided the member (or preceding beneficiary) died before age 75, subject to certain conditions and time limits.

• Income withdrawals paid to dependants, nominees or successors from drawdown funds of a deceased member who died before age 75 are exempt from income tax
• The exemption does not apply where drawdown payments were already being made from the fund before 6 April 2015
• Where unused uncrystallised funds are designated into a dependant's or nominee's drawdown fund more than two years after the scheme administrator knew or should have known of the member's death, the exemption is lost on those funds
• For successors' income withdrawal, the exemption applies where the immediately preceding beneficiary (whether a dependant, nominee or another successor) died before age 75