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HMRC internal manual

Inheritance Tax Manual

Pensions: omission to exercise a right: member in ill-health at commencement of income drawdown

Income drawdown is the situation where the deceased has reached pension age but has chosen not to secure an income for life with a pension or annuity. Instead they decide to draw a certain level of income from their pension fund leaving the unsecured funds available to draw down in the future and, ultimately, for death benefits.

In most cases, a scheme member will opt for income drawdown for genuine retirement planning reasons. If the scheme member survives for more than 2 years after starting income drawdown, the assumption is that they were in good health at the time. However, if the scheme member was in ill health when income drawdown commenced there can be an omission to take the full possible benefit from the pension rights. In this case, relief still applies where the lump sum death benefit payment is made to a relevant dependant (IHTM17304) or to charity.