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

Non-registered schemes: beneficiaries' annuities from drawdown funds

Section 646E sets out the circumstances in which annuities paid to beneficiaries from drawdown funds held in overseas pension schemes or relevant non-UK schemes can be received free of UK income tax, broadly mirroring the treatment that would apply if the scheme were a UK registered pension scheme.

• Annuities paid to dependants or nominees of a deceased scheme member who died on or after 3 December 2014 and before age 75 are exempt from income tax, provided the annuity was purchased from drawdown funds under a money purchase arrangement in an overseas or relevant non-UK scheme
• A similar exemption applies to annuities paid to successors where a previous beneficiary (dependant, nominee or successor) died on or after 3 December 2014 and before age 75, and the annuity was purchased from the successor's flexi-access drawdown fund
• The exemption for dependants' annuities does not apply where any payment was made to the beneficiary from the relevant drawdown fund before 6 April 2015, whether as an annuity payment, another annuity purchased from the same fund, or as dependants' income withdrawal
• Where a dependant's drawdown pension fund was converted to a flexi-access drawdown fund on or after 6 April 2015, the exemption is lost if payments had been made from the original drawdown fund before that date and those funds are represented in the new flexi-access fund

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