A few months ago I mentioned that we were waiting with bated breath for the Treasury to announce details of the new tax rules applicable to pensions on the death of the policyholder.

Currently anyone who is drawing benefits in the form of income drawdown can leave whatever remains in their pension pot, at death to a surviving spouse, without tax on their estate. Any benefits taken by the beneficiary being taxable at their marginal rate. However, if they don't have one the fund is taxed at a sinful 55% before what remains can be passed to children or other nominated beneficiaries.

There has been a great deal of debate in the industry about what changes would be made, with the general consensus being that the basic rules would remain unchanged but that the new tax rate would be 40%. While that would have been a big improvement it would hardly have been earth shattering.

However, to many peoples' surprise (including mine) the new rules have gone much further than expected. From next April anyone with a pension scheme dying before the age of 75 will, unless they have bought an annuity, be able to pass the balance of their fund as a tax free lump sum to a beneficiary of their choice.

That's a massive incentive for those in poor health to steer clear of impaired life annuities.

For those surviving beyond the age of 75 it will be possible to leave their fund without deduction of tax to their beneficiaries who can then chose to take it as income taxed at their marginal rate. In addition an option to take it all as lump sum taxed at 45% will still be available. In either case the overall tax bill would be significantly lowered.

Amazingly the two biggest objections to saving in pension schemes have now been almost simultaneously removed. Firstly the argument that "I can't take my benefits in the way I want to" and now that of "My pension will die with me" will now be swept away in April 2015.

It's an exciting new era for pension planning.

Robin Sainty APFS M.A. (Cantab)