Income Tax (Earnings and Pensions) Act 2003 section 646B

Registered schemes: beneficiaries' annuities from unused funds

Section 646B sets out the circumstances in which annuities paid to beneficiaries of a deceased pension scheme member can be received free of income tax, provided the member or beneficiary died before age 75 and on or after 3 December 2014.

• Dependants' and nominees' annuities purchased from unused drawdown funds, unused uncrystallised funds, or as replacement annuities following a transfer between insurers are exempt from income tax, provided the member died before age 75 on or after 3 December 2014 and no payment was made before 6 April 2015
• Successors' annuities are similarly exempt where the preceding beneficiary (dependant, nominee or successor) died before age 75 on or after 3 December 2014, the annuity was purchased from undrawn funds or via an insurer-to-insurer transfer, and no payment was made before 6 April 2015
• Dependants' or nominees' annuities originally purchased alongside the member's own lifetime annuity are also tax-free under the same age and date conditions, as are guaranteed-period payments of a lifetime annuity that continue to a beneficiary after the member's death
• Where unused uncrystallised funds are used, the beneficiary must become entitled to the annuity within two years of the earlier of the date the scheme administrator knew of the member's death or could reasonably have been expected to know of it