Death Benefits

Question 1

How are death benefits tested if the member dies before 75 and the administrator is notified within the 2 year timeframe?

Answer 1

Tested against remaining LSDBA
If within paid without tax to beneficiary
Any excess charged at recipients marginal rate

Question 2

How are death benefits tested if the member dies before 75 and the administrator is not notified within the 2 year timeframe or after 75?

Answer 2

No LSDBA test
Full amount taxed at recipients marginal rate or
For a trustee 45% (NOT bare trust)

Question 3

What is an annuity protection lump sum Death benefit?

Answer 3

An option under lifetime annuity that pays a lump sum Death benefit based on the initial price purchase price and the gross annuity payments recived.

Question 4

What are the annuity protection lump sum death benefits rules?

Answer 4

2 years pre 75 tested against LSDBA rule stands
No restriction on who can receive the benefit (Nominee recommended)

Question 5

What was the historical position for paying tax on continuing income, and what is it now? DC schemes

Answer 5

Paid at the recipients highest marginal rate

Now
Tax-free prior to 75 subject to 2 year window.

Question 6

What is the taxation for scheme pensions (mostly DB) on death benefits?

Answer 6

All subject to income tax regardless of when the recipient died and subject to the 10-year guarantee period.

Question 7

What did HMRC v Staveley find?

Answer 7

That care needs to be taken when transferring out of an occupational scheme into a personal pension scheme to benefit from IHT free death benefit as this could be avoidance.

Question 8

Summarise death benefits for uncrystalised DC funds

Answer 8

Question 9

Summarise death benefits DB schemes

Answer 9

Question 10

Summarise death benefits for crystalised DC funds

Answer 10