RPSM10105530 - Technical Pages: Death benefits: Lump sums: Member dies before or after age 75: Pension guarantee

A five year pension guarantee in existence on 5 April 2006

Before 6 April 2006 some schemes allowed pension benefits to be guaranteed so that a lump sum death benefit could be paid if the member died in the five years following the later of

• the day the member became entitled to their pension or
• the day of the first pension payment.

If a member of a registered pension scheme had on 5 April 2006 an actual right (as opposed to a prospective right) to a pension with such a guarantee under a scheme which on 5 April 2005 was

• a scheme approved for the purposes of Chapter 1 Part 14 ICTA 1988,
• a former approved superannuation fund,
• a relevant statutory scheme (as defined in section 611A ICTA 1988) a scheme treated by HMRC as if it was a relevant statutory scheme,
• an annuity contract used to secure benefits provided by an of the above types of pensions scheme, but not providing immediate payment of benefits, or
• a Parliamentary pension scheme or fund mentioned in section 613(4)(b) to (d) ICTA 1988,

the lump sum death benefit may still be paid if the member dies within the five year period described above.

The transitional provisions of Schedule 36 allow the lump sum guarantee payment to be regarded as part of a pension protection lump sum death benefit, an annuity protection lump sum death benefit, or an unsecured pension lump sum death benefit (as appropriate). Even where the member is age 75 or over when they die the payment of the lump sum guarantee is still regarded as one of these lump sums.

Where the member is 75 or over when they die the limit for these lump sums is changed and replaced with a transitional protection limit. RPSM10105540 sets out the details of the transitional protection limit.

RPSM10105550 sets out the taxation of these protected lump sum guarantee death benefits.

Benefits from a personal pension scheme or retirement annuity contract are not covered by these provisions.