Choice of death benefits
One of the main attractions of drawdown is that if the policholder dies before the age of 75 there is achoice of death benefits, whereas with an annuity the capital is lost on death unless there is a joint life option or income guarantee.
On the death of the policyholder there are three options:
Lump Sum Death Benefit
- A surviving spouse or dependant may take the remaining pension fund as a capital sum, less a 35% tax charge.
- The lump sum payment will be free of IHT, providing the correct trust has been established.
Continued Drawdown
- A surviving spouse or dependant may continue
making income withdrawals
Annuity Purchase
- A single life annuity can be purchased for the spouse or dependant without a guarantee period or value protection.