Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Drawdown definition

What does Drawdown mean? In pensions practice, pension drawdown means taking income from a money purchase (defined contribution) pension while keeping the remaining fund invested. In England & Wales, Scotland and Northern Ireland, the statutory form is flexi‑access drawdown, defined in the Finance Act 2004 (as amended) and HMRC rules; capped drawdown persists only for existing arrangements. members can normally take a pension commencement lump sum (often up to 25% subject to current limits) and then choose variable withdrawals; income is taxed at the member’s marginal rates. First flexible access usually triggers the money purchase annual allowance for future contributions. On death, beneficiaries...

UK pension drawdown death benefits: lump sums, annuities and drawdown options; dependants/nominees/successors; income tax and IHT treatment; 2024 allowances and 2027 IHT reforms

Published by a LexisNexis Pensions expert

Practice notes

FORTHCOMING CHANGE:

The Finance Bill 2025–26 proposes rules that will draw unused pension pots and death benefits into a deceased member’s estate, and therefore into the inheritance tax (IHT) net, from 6 April 2027. It should be noted that these changes will not extend to death‑in‑service payments to active employees in relevant employment, nor to a dependant’s scheme pension (that is, a DB scheme pension for a spouse or dependant). The usual exemptions, including those for spouses and civil partners, will continue to apply. Liability for settling the IHT will principally sit with the personal representatives of the estate. For more detail, please see Practice Note: Inheritance tax and pensions; News Analyses: HMRC—Reforming inheritance tax—unused pension funds and death benefits; HMRC confirms new IHT rules on unused pension funds to apply from 6 April 2027; and HMRC policy paper: Inheritance Tax: unused pension funds and death benefits (November 2025).

If a member of a registered pension scheme that offers flexible benefits dies whilst in drawdown (via income withdrawal or a short‑term annuity), amounts may still be held in their drawdown pension fund or flexi‑access drawdown fund at the time of death. In that event, those sums may:

constitute part of...

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Web page updated on 22/05/2026

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