RPSM10106010 - Technical Pages: Death benefits: Lump sums from 6 April 2011: Introduction

Introduction: What has changed from 6 April 2011

From 6 April 2011 the following types of authorised lump sum death benefits can be paid after age 75

• defined benefits lump sum death benefit,
• uncrystallised funds lump sum death benefit,
• pension protection lump sum death benefit,
• annuity protection lump sum death benefit,
• drawdown pension fund lump sum death benefit (previously called an unsecured pension fund lump sum death benefit),
• trivial commutation lump sum death benefit,
• winding-up lump sum death benefit,
• charity lump sum death benefit,
• life cover lump sum.

The following types of lump sum will be taxed at 55 per cent

• pension protection lump sum death benefit if the member died after 5 April 2011
• annuity protection lump sum death benefit if the member died after 5 April 2011
• drawdown pension fund lump sum death benefit if the member dies after 5 April 2011
• uncrystallised fund lump sum death benefit taxed at 55% if paid after age 75
• defined benefits lump sum death benefit if the member dies after 5 April 2011 whilst aged 75 or above

A charity lump sum death benefit can be paid if the member (or dependant) died before they were 75. It can only be paid to a charity nominated by the member before they died. However, if the member died after age 75 a charity lump sum death benefit can also be paid from uncrystallised funds provided that there is no dependant.

A life cover lump sum can only be paid after age 75 so its payment is not a benefit crystallisation event and does not count for the purposes of the lifetime allowance. There is no income tax charge on a life cover lump sum.