Private pensions can be a great way to pass on wealth, but tax implications depend on the age of the deceased and the type of pension. Some beneficiaries may receive funds tax-free, while others could face significant tax charges. Knowing the rules is essential.

Private pensions can be an effective means of passing on wealth, but it is crucial to consider the potential tax implications when inheriting a private pension. Typically, the individual who passed away will have nominated the beneficiary by informing their pension provider of their wish for the remaining funds in the pension pot to be inherited by you. If the nominated beneficiary cannot be located or has since passed away, the pension provider may make alternative arrangements and direct the funds to someone else.

In general, if you inherit a private pension from someone who died before the age of 75, the benefits remaining in the pension can be paid out as a lump sum or drawdown income without any tax liability. However, if the pension holder passed away after the age of 75, the inherited pension will be subject to taxation at your marginal income tax rate. This means you would pay 20% tax if you are a basic rate taxpayer, 40% if you are in the higher tax bracket, or 45% if you are taxed at the top rate. Note that tax rates may differ for Scottish taxpayers.

For pensions from a defined benefit scheme, typically associated with workplace pensions, there are additional restrictions. In most cases, the pension can only be paid to a dependant of the deceased, such as a spouse, civil partner, or a child under the age of 23. If the pension scheme permits, this rule may be adjusted, but any inheritance under such circumstances may be subject to a tax charge of up to 55% as an unauthorised payment.

The rules governing pension inheritance are complex, varying depending on the type of pension and the age of the deceased at the time of death. Furthermore, there are strict time limits that must be adhered to in order to ensure compliance.

The enhanced Check Your State Pension forecast service is available online. The service can be found on GOV.UK at the following webpage https://www.gov.uk/check-state-pension.

The new digital service is a joint service by HMRC and the Department for Work and Pensions (DWP). It has been enhanced to include a fully end-to-end digital solution.

The service allows most people under State Pension age to view their pension forecast and identify any gaps in their National Insurance Contributions (NICs) record. This will be helpful for taxpayers looking to make voluntary NIC contributions to increase their entitlement to benefits, including the State or New State Pension.

Usually, HMRC allow you to pay voluntary contributions for the past 6 tax years. The deadline is 5 April each year. However, there is currently an opportunity for people to make up for gaps in their NICs for the tax years from April 2006 to April 2017 as part of transitional measures to the new State Pension. The deadline has been extended a number of times and has been most recently extended until 5 April 2025.

The launch of HMRC’s online service will help speed up this process. HMRC’s helplines have been struggling to meet the demands for information and processing claims to pay additional NIC contributions.

HMRC has also confirmed that all relevant voluntary NIC payments will be accepted at the rates applicable in 2022-23 until 5 April 2025.

It is advised to regularly check your State Pension position to help optimise your entitlement. You should also consider what other savings or pensions might be required for a long and comfortable retirement.

You can usually claim tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of income tax paid.

This means that if you are:

• A basic rate taxpayer you get 20% pension tax relief
• A higher rate taxpayer you can claim 40% pension tax relief
• An additional rate taxpayer you can claim 45% pension tax relief

The first 20% of tax relief is usually automatically applied by your employer with no further action required if you are a basic-rate taxpayer. If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs on your self-assessment tax return.

You can claim additional tax relief on your self-assessment tax return for money you place into a private pension amounting to:

• 20% up to the amount of any income you have paid 40% tax on; and
• 25% up to the amount of any income you have paid 45% tax on.

You can also call or write to HMRC to make a claim if you pay Income Tax at 40%.

These figures apply for those claiming tax relief in England, Wales or Northern Ireland. There are regional differences if you are based in Scotland.

There is an annual allowance for tax relief on pensions of £60,000. There is also a three year carry forward rule that allows you to carry forward any unused amount of your annual allowance from the last three tax years if you have made pension savings in those years.

The lifetime limit for tax relief on pension contributions was removed with effect from 6 April 2023 and has now been abolished.

You can access the Check Your State Pension forecast service on GOV.UK via this link: https://www.gov.uk/check-state-pension. This digital service is provided jointly by HM Revenue and Customs (HMRC) and the Department for Work and Pensions (DWP).

The service enables most individuals under State Pension age to view their pension forecast and identify any gaps in their National Insurance Contributions (NICs). This feature is particularly useful for those who want to make voluntary NIC contributions to boost their entitlement to benefits such as the State or New State Pension.

Typically, HMRC permits voluntary contributions for the past 6 tax years, with a deadline of 5 April each year. However, there is currently a special opportunity to address NIC gaps from April 2006 to April 2017 due to transitional arrangements related to the new State Pension. The deadline for making these contributions has been extended several times and is now set for 5 April 2025.

Regularly reviewing your State Pension status is important for optimising your benefits. Additionally, you should consider other savings or pensions you may need for a secure and comfortable retirement.

The enhanced Check Your State Pension forecast service is now available online. The service can be found on GOV.UK at the following webpage https://www.gov.uk/check-state-pension.

The new digital service is a joint service by HM Revenue and Customs (HMRC) and the Department for Work and Pensions (DWP). It has been enhanced to include a fully end-to-end digital solution.

The service allows most people under State Pension age to view their pension forecast and identify any gaps in their National Insurance Contributions (NICs) record. This will be helpful for taxpayers looking to make voluntary NIC contributions to increase their entitlement to benefits, including the State or New State Pension.

Usually, HMRC allow you to pay voluntary contributions for the past 6 tax years. The deadline is 5 April each year. However, there is currently an opportunity for people to make up gaps in their NICs for the tax years from April 2006 to April 2017 as part of transitional measures to the new State Pension. The deadline has been extended a number of times and has been most recently extended until 5 April 2025.

The launch of HMRC’s online service will help speed up this process. HMRC’s helplines have been struggling to meet the demands for information and processing claims to pay additional NIC contributions.

HMRC has also confirmed that all relevant voluntary NIC payments will be accepted at the rates applicable in 2022-23 until 5 April 2025.

It is worthwhile checking your State Pension position on a regular basis, this will help to optimise your entitlement. You should also consider what other savings or pensions might be required for a long and comfortable retirement.

You can usually claim tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of income tax paid.

This means that if you are:

• A basic rate taxpayer, you get 20% pension tax relief.
• A higher rate taxpayer, you can claim 40% pension tax relief.
• An additional rate taxpayer, you can claim 45% pension tax relief.

The first 20% of tax relief is usually automatically applied by your employer with no further action required if you are a basic-rate taxpayer. If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs on your self-assessment tax return.

The above applies for claiming tax relief in England, Wales or Northern Ireland. There are some regional differences if you are based in Scotland.

There is an annual allowance for tax relief on pensions of £60,000. This limit remains unchanged in the new 2024-25 tax year. There is also a rule that allows you to carry forward any unused amount of your annual allowance for three tax years.

The lifetime limit for tax relief on pension contributions was removed with effect from 6 April 2023 and has now been abolished.