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Jennifer Irvine
Senior Technical Support Consultant

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Nominee and successor flexi access drawdown

Published  14 January 2025
   5 min read

In this article we consider what nominee and successor flexi-access drawdown are, how they operate and their attraction.

Important Information

In her Autumn 2024 Budget statement, Rachel Reeves announced the government’s intention to bring unused pension funds and death benefits within the value of an individual’s estate for inheritance tax purposes from 6 April 2027.

More detail can be found in our article Inheritance tax on pension death benefits from April 2027.

The following article is correct based on the current legislation and takes no account of the government’s proposed changes

Key facts

  • Since 6 April 2015 you no longer have to be a dependant of the planholder to receive drawdown income on their death.
  • Nominees are individuals nominated by the planholder.
  • Successors are individuals nominated by the nominee.
  • Scheme administrators can only nominate a beneficiary for flexi-access drawdown if there are no surviving dependants or nominees of the planholder.

What is nominee and successor flexi-access drawdown?

Only a dependant could receive a drawdown pension on the planholder's death before 6 April 2015. Now a nominee, or nominees, can also receive a drawdown pension. This is called nominee flexi-access drawdown.

And on their death, a successor or successors can take a drawdown pension. This is called successor flexi-access drawdown.

Who can be a nominee and successor?

A nominee is anyone nominated by the planholder or the scheme administrator who is not a dependant. The scheme administrator can only nominate someone where there is no surviving dependant, individual or charity nominated by the planholder.

A successor is anyone nominated by a dependant, nominee or successor of the planholder, or by the scheme administrator. The scheme administrator can only nominate an individual where there is no surviving individual or charity nominated by the beneficiary.

Why is it important to nominate a beneficiary?

A dependant or named beneficiary can choose to take their benefits as a lump sum, an annuity or as nominee or successor flexi-access drawdown. The scheme administrator can only nominate a beneficiary to receive flexi-access drawdown where there is no surviving dependant or named beneficiary. If there is a surviving dependant or individual(s) nominated by the scheme member, the scheme administrator wouldn't be able to pay flexi-access drawdown to anyone else; only lump sums can be paid. 

Apart from being good practice, it is vital that a planholder nominates and keeps their nominated beneficiaries up to date if they want them to have access to all death benefit options available under the scheme including flexi-access drawdown.

How does nominee and successor flexi-access drawdown operate?

Nominee and successor flexi-access drawdown operate in an identical manner to dependant's flexi-access drawdown. In particular:

  • No tax-free cash is available on setting up the nominee or successor flexi-access drawdown plan.
  • No contributions can be paid to the flexi-access drawdown plan.
  • Income payments to the nominee or successor are paid tax-free if the planholder died before age 75. Otherwise, income payments are taxed at their marginal rate of income tax.
  • The money purchase annual allowance is not triggered by taking income from a nominee or successor flexi-access drawdown plan.

What makes nominee and successor flexi-access drawdown attractive?

The retirement freedoms have changed general thinking towards pensions. Nominee and successor drawdown are seen as an attractive means of:

  • Passing down wealth through family generations under a pension wrapper. Some people have referred to this as 'family pensions'.
  • Retaining monies under a tax advantaged environment until such time they are needed by the nominee or successor. Or if they are not needed, they can be passed down to the next generation on the nominee or successor's death.
  • Providing a flexible income to the nominee or successor as and when they need it. And if their predecessor died before age 75, income payments are made tax-free.  If a lump sum or annuity were chosen, these also would be free of income tax if the predecessor died before age 75.

Frequently asked questions

Here are some of the more frequently asked questions we've been asked about nominee flexi-access drawdown and successor flexi-access drawdown.

Read more  about Frequently asked questions

Further information

Pension death benefits

In this article we explain what death benefits can be paid from money purchase and defined benefit pension scheme and how they are taxed.

Read more  about Pension death benefits

Inheritance tax on pension death benefits from April 2027

In the Autumn 2024 Budget statement the government announced its intention to bring unused pension funds and death benefits within the value of an individual’s estate for inheritance tax purposes from 6 April 2027.

Read more  about Inheritance tax on pension death benefits from April 2027

Death benefits: Direction

In this article we explain what direction means when applied to the payment of pension death benefits and the reasons why you would use that rather than discretion. 

Read more  about Death benefits: Direction

Death benefits: Discretion and how to nominate a beneficiary

This article describes what how discretion works and how a nomination form (expression of wish) can be used to let the scheme administrators/trustees know the individual’s wishes as to whom death benefits should be paid to.

Read more  about Death benefits: Discretion and how to nominate a beneficiary

Money purchase annual allowance

This article explains what the money purchase annual allowance (MPAA) is, what triggers it and the impact on defined benefit schemes.

Read more  about Money purchase annual allowance

Residence nil-rate band

On the 6 April 2015 the residence nil-rate band was introduced. This is an additional threshold for inheritance tax planning above the current £325,000 threshold. Here we explain how this works.

Read more  about Residence nil-rate band

Disclaimer

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.