RPSM03111030 - Technical Pages: Protecting pension rights from tax charges: Pipeline lump sum: Death of member

Lump sums paid on the death of a member

[Article 40 The Taxation of Pension Schemes (Transitional Provisions) Order 2006 –SI 2006/572 – as amended by Article 4 The Taxation of pension Schemes (Transitional provisions)(Amendment) Order 2006 – SI 2006/1962] [The Registered Pension Schemes (Authorised Member Payments)(No.2) Regulations 2006 – SI 2006/571]

A lump sum paid by a scheme deemed to be a registered pension scheme by virtue of paragraph 1(1) Schedule 36 (see RPSM03111010)

• in respect of the death of a member before 6 April 2006,
• within two years of the date the scheme administrator could reasonably have known of the member’s death,
• in accordance with the scheme rules as they stood either

• the payment would not have led to HMRC withdrawing approval of the scheme

is an authorised payment. The lump sum is not a relevant lump sum benefit and so the payment of the lump sum is not a benefit crystallisation event. The lump sum payment will not be liable to the lifetime allowance charge.

The lump sums will continue to have the same tax treatment after 5 April 2006 as they had before 6 April 2006. So a lump sum paid from a personal pension scheme due to ‘death in drawdown’ will continue to be taxable under s648B ICTA 1988. The scheme administrator of the registered pension scheme will be liable to the tax.

Regulation 5 of the Personal Pension Schemes (Information Powers) Regulations 2000 – SI 2000/2316 continues to apply to payments liable to tax under s648B ICTA 1988. Scheme administrators must notify HMRC of any tax due by 5 May following the end of the tax year in which the payment is made.