Pension Death Benefits

Question 1

DB Scheme (Deferred Member)

Answer 1

• dependants pension may be payable, but only if member is survived by a dependent as specified by scheme
• income received taxed as PAYE
• dependants pension is not a BCE so no LTA test
• dependant can choose to commute the income for a trivial commutation lumps sum if income stream is less than £30k - this taxed as PAYE

Question 2

DB Scheme (Pensioner member)

Answer 2

• dependants scheme pension may be payable
• remaining income due under a term certain guarantee (cannot exceed 10 years) will be payable
• income taxed as recipient PAYE
• dpenednants income or balance of guarantee can be commuted for a trivial commutation lumps sum death benefit if valued at no more than £30k - taxed as PAYE

Question 3

MP Scheme

Answer 3

Death Benefits

• Lump Sum
• FAD
• Lifetime annuity

LTA

• Tested if death before 75 and benefit uncrystallised
• otherwise, no test

IT

• Tax free if death before 5 and designated / paid within 2 year window
• Otherwise PAYE

IHT

• Usually outside estate
• HMRC may deem it a transfer of value if death is within 2 ears of transfer