RPSM10105160 - Technical Pages: Death benefits: Lump sums pre 6 April 2011: Member dies aged under 75: Annuity protection lump sum death benefit

This guidance only covers the position where the member died before 6 April 2011. If the member died on or after 6 April 2011 see RPSM10106000.

Payment of an annuity protection lump sum death benefit

Where a member becomes entitled to a scheme pension from a money purchase arrangement or a lifetime annuity contract is purchased on their behalf the arising pension entitlement may be granted pension protection. This means that the scheme or insurance company guarantees that they will pay the balance as a lump sum death benefit if

• the member dies before their 75^th birthday, and
• the member has not received a certain total level of scheme pension or lifetime annuity payment by that time.

This is an annuity protection lump sum death benefit.

An annuity protection lump sum death benefit is a lump sum benefit paid following the death of a scheme member where

• the member had not reached the age of 75 at the point they died,
• it is paid in respect of a money purchase arrangement, and
• it is paid in respect of an actual lifetime annuity or scheme pension entitlement the member had under the arrangement at the date they died.

The total amount of annuity protection lump sum death benefit paid under an arrangement must be within the limit set out in RPSM10105170.

Where a payment is made that breaches this maximum, the excess payment will be an unauthorised member payment.

RPSM10105190 explains how an annuity protection lump sum death benefit is taxed.