RPSM10303010 - Scheme Administrator Pages: Death benefits: Payment of lump sums: Member dies aged under 75: Taxation of a pension protection lump sum death benefit or annuity protection lump sum death benefit

This guidance only covers deaths up to 5 April 2011. If the member died on or after 6 April 2011 see RPSM10106000.

Member dies before 75: Taxation of a pension protection lump sum death benefit or annuity protection lump sum death benefit

Where a pension protection lump sum death benefit or annuity protection lump sum death benefit is paid the scheme administrator becomes liable to an income tax charge at the rate of 35% in respect of payment. This is called a special lump sum death benefits charge.

The special lump sum death benefits charge will not apply to any part of the lump sum that arises from the payment of a lump sum under a pension guarantee in existence on 5 April 2006 - see RPSM10105530.

Where the lump sum death benefit is paid by an insurance company they become liable for the charge due as if the insurance company was the scheme administrator.

The scheme administrator or insurance company may deduct the charge due before making the payment. RPSM04101110 explains how the scheme administrator or insurance company accounts for the charge due.