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HMRC internal manual

Pensions Tax Manual

Death benefits: types of pension: beneficiary’s flexi-access drawdown from 6 April 2015: changes from 6 April 2015

Glossary PTM000001


A drawdown pension
Beneficiary’s short-term annuity
Beneficiary’s income withdrawal

A drawdown pension

Paragraphs 21, 27B and 27G Schedule 28 Finance Act 2004

From 6 April 2015, in addition to a dependant, a drawdown pension can also be provided to a nominee and a successor. For the purposes of this guidance, a beneficiary may be any of a dependant, a nominee or a successor.

From 6 April 2015, a beneficiary’s drawdown pension continues to comprise both a short-term annuity and income withdrawal but the nature of both these types of drawdown pension has changed.

Beneficiary’s short-term annuity

The rules about allowable reductions in short-term annuities have changed. The revised rules for a short-term annuity apply to those purchased on or after 6 April 2015 (see PTM072420).

For short-term annuities that were purchased before 6 April 2015, the allowable reduction rules are unchanged. See PTM072340.

Further changes allow the continuation of an existing dependant’s drawdown fund or flexi-access drawdown fund when the child dependant reaches age 23 on or after 16 September 2016, from which a dependant’s short-term annuity can be purchased (see Dependant’s income withdrawal below).

Beneficiary’s income withdrawal

From 6 April 2015, flexi-access drawdown is the only unsecured pension option open to a beneficiary of a money-purchase arrangement (including a dependant where, before 6 April 2015, none of the funds in the arrangement had been designated as available for the provision of dependants’ drawdown pension). From that date, the tax rules allow a beneficiary to designate the sums and assets in their money purchase arrangement into a flexi-access drawdown fund from which they can draw down any amount over whatever period they choose. See PTM072430 for more detail on the rules for beneficiary’s flexi-access drawdown.

Where, before 6 April 2015, a dependant had designated funds into one or more dependants’ drawdown funds from which they were taking flexible drawdown, then on 6 April 2015 these funds automatically became dependant’s flexi-access drawdown funds. See PTM072440 for more detail.

Where, before 6 April 2015, a dependant had designated funds into one or more dependants’ drawdown pension funds from which they were taking dependants’ capped drawdown pension, then from 6 April 2015 the individual may either:

  • arrange at any time from 6 April 2015 onwards for their fund to be converted into a flexi-access drawdown fund, or
  • continue to take a capped drawdown pension from the arrangement.

See PTM072450 for more detail.

Subject to the rules of the scheme, a beneficiary can at any time use their drawdown pension fund or flexi-access drawdown fund (as appropriate) to secure a pension by purchase of a beneficiary’s annuity - see PTM072200.

Dependant’s income withdrawal

Paragraph 15 Schedule 28 Finance Act 2004

Paragraph 6 Schedule 5 Finance Act 2016

Where a child of the member

  • qualifies as a dependant because they are aged under 23 (rather than through mental or physical impairment)
  • first designated funds into a drawdown fund or flexi-access drawdown fund before age 23 and
  • reaches age 23 on or after 16 September 2016

they can continue to receive dependants’ income withdrawal or a short-term annuity from flexi-access drawdown as authorised payments regardless of their age.