PSI11.2.26 - Benefits on Death in Service: Lump Sum Benefits - Interest on Delayed Payment of Lump Sum Death Benefit

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

Where payment of the lump sum death in service benefit is delayed, interest may be paid on the money from the date of death until the money leaves the scheme. This interest is not true interest for income tax purposes but forms part of the lump sum benefit payable out of the scheme subject to the proviso that the normal limits on total lump sum benefits (excluding refunded contributions and interest thereon) are not exceeded. Once the money has left the scheme to be held under separate trusts the position is different. Any interest earned thereafter is chargeable to income tax in the hands of the trustee.

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