RPSM03307011 - Scheme Administrator Pages: Protecting pension rights from tax charges: Benefit payments - other forms of protection: Death benefits - information

Information requirements when paying lump sum benefits in respect of the death of a member with primary or enhanced protection

[Regs 8 & 9 The Registered Pension Schemes (Provision of Information) Regulations 2006 – SI 2006/567]

It is the recipient of the death benefit that is liable to any lifetime allowance charge that is due. The scheme administrator is not jointly liable to the charge and so is not expected to deduct any lifetime allowance charge due before paying benefits. The process for testing and documenting benefit payment is therefore different from the process that would apply on a benefit crystallisation event in the member’s lifetime.

RPSM11103600 and following pages set out the process a scheme administrator should follow when paying a defined benefits lump sum death benefit or an uncrystallised funds lump sum death benefit. In particular the scheme administrator must

• tell the personal representatives of the deceased member of the percentage of the standard lifetime allowance that has been used up by the payment of the lump sum death benefit, the amount and the date of the payment within 3 months of the payment of the benefit; and
• provide the personal representatives with information on the amount of the standard lifetime allowance used up by the crystallisation of any benefits in respect of the deceased member (other than the lump sum death benefit shown in the bullet point above). This information must be provided within 2 months of the receipt of the request for information from the personal representative.

Event Report to HMRC

[Reg 3 ‘reportable events 2 and 6’ The Registered Pension Schemes (Provision of Information) Regulations 2006 – SI 2006/567]

The scheme administrator must report the lump sum death benefit payment to HMRC where that payment (either alone, or with other lump sum death benefits paid from the scheme) represents more than 50% of the standard lifetime allowance for the tax year in which the member died.

Although the member had primary or enhanced protection there is no requirement to report the payment of the lump sum death benefit under ‘reportable event 6’ (where total benefit crystallisations from all registered pension scheme are more than the standard lifetime allowance). So the provisions for reportable event 6 described in RPSM03305060 and RPSM03303070 do not apply.