Kate decides to draw the money as a lump sum and receives a sum of £192,500 (£350,000 less £157,500 of Income Tax at 45%).

Susan’s friend Nora, 77, leaves her pension fund to her granddaughter Jessica. Jessica is a student and decides to draw an income of £10,600 each year to pay her tuition fees. As Jessica has no other income she can draw this amount each year without paying any tax.

If further income is required to provide for living costs, this would be subject to Basic Rate Tax at 20% (up to the higher rate tax threshold).