The WPS Financial Group, one of Wales’ biggest financial advisory groups, has welcomed new changes to pension rules, which make it easier and more tax-efficient to transfer pensions after death.

The changes, announced by Chancellor George Osborn this week, are partly designed to make pensions even more attractive to savers on the basis they can now be handed down, allowing relatives to also benefit. The changes apply from April 2015.

If death occurs before the age of 75, a pension fund can be transferred to anyone, tax free, at any time, either in instalments, or as a one-off lump sum. This will apply to both crystallised and uncrystallised funds, which means those in drawdown will see their potential tax charge on death cut from 55% to zero overnight. A fund can also be used to provide beneficiaries with a sustainable stream of income which is not subject to inheritance tax. This does not apply to annuities or scheme pensions.

If death comes after the age of 75, defined contribution pension savers will be able to nominate who ‘inherits’ their remaining pension funds. If drawn as income, this money will be taxed at the beneficiary’s marginal rate. Alternatively, the beneficiary could take it as a lump sum less a 45% tax charge.

Jon Francis, Director of WPS Financial Group, said:

“Any changes to pension rules that encourage people to save have to be seen as good news. This benefits everyone regardless of whether the fund is large or not. To know that any unused funds will pass down the generations on death without a huge immediate tax charge is fantastic. It makes sense to review wills and pension funds immediately.

“Ultimately, this should make pensions far more attractive as a long-term savings vehicle. Savers can now be secure in the knowledge that they can not only draw on their savings without restriction from 55 but also, any unused savings can be passed on to their inheritors tax free upon death.”