Hello I am a bit confused about how death benefits are taxed after reading Chapter 3 / other materials. As I understand it: dependents pensions are not tested against the LTA or subject to inheritance tax lump sums on death before age 75 are tested against the LTA but are not subject to inheritance tax lump sums on death after age 75 are not tested against the LTA or subject to inheritance tax but are automatically taxed at 55% Is this correct? Thanks
Hi Ali Please see below for references from the 2014 materials. For definitive confirmation of all tax queries, use of a professional tax adviser is recommended! HMRC’s Registered Pension Schemes manual may also be helpful. 1) dependents pensions are not tested against the LTA ... [Chapter 3, page 17] ... or subject to inheritance tax The SA4 Core Reading is silent on this issue. So it's arguably beyond Subject SA4 to know this. One for a specialist or the manuals I think. 2) lump sums on death before age 75 are tested against the LTA ... [Chapter 3, page 16] Note that this applies if death is before the pension comes into payment. Page 17 summarises what generally happens if the pension was already in payment and the member was less than age 75 on death. ... but are not subject to inheritance tax [Chapter 3, page 4] Note that the trustees must have discretion as to who the lump sum should be paid 3) lump sums on death after age 75 are not tested against the LTA ... [Chapter 3, page 12] ... or subject to inheritance tax ... [Chapter 3, page 4] Note that the trustees must have discretion as to who the lump sum should be paid ... but are automatically taxed at 55% This is an area where there have been some changes. It would be worth viewing: http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM10106010.htm Best wishes Stuart
