Crystallisation

As part of the proposals to remove the requirement to annuitise at age 75 the government has introduced provisions which mean that lump sum death benefits will suffer a 55% recovery charge if:

• the pension scheme member dies having crystallised his benefits (e.g. in income drawdown or where he has set up a lifetime annuity with capital protection); or
• the pension scheme member dies after attaining age 75.

For those who die before age 75 without having crystallised their benefits there will be no recovery charge.

This change in the tax treatment of drawdown lump sum death benefits is another factor that must now be taken into account when an adviser is considering the relative merits of drawdown and phased drawdown for an individual.

This change will certainly make phased drawdown more attractive from a death benefit perspective because there is...