The following Private Client guidance note Produced in partnership with John Hayward, Pensions Author, and Wyn Derbyshire of Gunnercooke LLP provides comprehensive and up to date legal information covering:
This Practice Note looks at the benefits which are payable where a member of an occupational or personal pension scheme dies before retirement without taking any benefits, or dies while in receipt of a secured pension or in receipt of a drawdown pension. It also examines the impact of inheritance tax (IHT) on the death benefits payable and provides some practical tips on how members can during their lifetime reduce tax liabilities on benefits payable on death.
Where a member of a pension scheme dies without having taken their retirement benefits or having taken part of their retirement benefits, the whole of the member’s unvested fund may be used to pay a cash lump sum, or to pay a smaller lump sum and dependants’ pensions, or to pay only dependants’ pensions. From 6 April 2015, the lump sum death benefit and/or survivor’s pension may be paid to a nominee or successor as well as to a dependant. There are no limits on the benefits payable either as a lump sum or as dependants’ pensions, but any lump sum benefit up to 5 April 2015 was tested against the lifetime allowance (see Pensions and lifetime planning—Part 1). Any excess over the lifetime allowance was subject to a tax charge of 55% payable by the beneficiary, otherwise any cash
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