(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)
A lump sum death benefit may be paid if the member dies within 5
years of the date of commencing income drawdown. This payment may
be made regardless of the type of guarantee (if any) attaching to
the pension. The lump sum death benefit may be paid to any person
at the discretion of the trustees. The lump sum must not exceed the
balance of the instalments falling due between the pensioner's
death and the end of the 5 year period. In these circumstances the
balance may be based on the amount of pension the member would
otherwise have been receiving if he/she had opted for 100%
withdrawal. For these purposes, 100% is determined at the date of
commencement of income drawdown regardless of any subsequent
variations. Any undrawn amounts of pension (i.e. the difference
between 100% withdrawal and the amounts actually drawndown) for the
period prior to the date of death may be paid in addition.
Where part of the member's benefits have been secured by the
purchase of a tranche of an annuity or by the purchase of an
annuity from the AVC fund prior to the member's death the amount of
the lump sum death benefit must be further reduced by
The lump sum death benefit must not exceed the value of the member's fund.
