Death after buying an Annuity
DEATH AFTER BUYING AN ANNUITY – TAX CUT
What has Changed
If you buy an annuity, you can choose for the income to be paid to your spouse or partner after you die (a joint-life annuity). You can also choose a guarantee period or value protection – for example, if you buy a 10 year guarantee and die after 2 years, the annuity will be paid for another 8 years to your spouse, partner or beneficiaries. These payments used to be subject to tax. They are now free of UK income tax if you die before age 75 and the annuity you have is a lifetime annuity (death benefits paid from a scheme pension as value protection, a joint-life annuity or as a continuing guarantee period are not tax free. For further details check with your scheme pension provider to see what the implications of the new rules are).
A joint-life or dependant’s annuity can be paid to anyone after you die, subject to any restrictions of your annuity provider. On their subsequent death any value protection or remaining guarantee period can be paid to anyone.
Who is Affected
Anybody with a lifetime annuity with joint life, value protection or guarantee period who died on or after 3 December 2014 before turning 75. The first income payment to your partner, spouse or beneficiaries must have been made after 5 April 2015, otherwise it will be taxable