RPSM03111040 - Technical Pages: Protecting pension rights from tax charges: Pipeline lump sum: Death of a dependant

Lump sums paid in respect of the death of a dependant

[Article 41 The Taxation of Pension Schemes (Transitional Provisions) Order 2006 –SI 2006/572 – as amended by Article 5 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 personal pension scheme that is deemed to be a registered pension scheme on 6 April 2006 in respect of the death of a dependant of a former member before 6 April 2006

• within two years of the date the scheme administrator could reasonably have known of the dependant’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 payment is not a benefit crystallisation event and so will not be liable to the lifetime allowance charge.

The lump sum will 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.