News
Taxation of Death Benefits from 6th April 2011
18-04-2011
The Finance Bill 2011 introduces changes in the taxation of the lump sum death benefits payable from registered pension schemes.
In the event of the death of a pension scheme member any remaining fund can be used to provide a lump sum payment to their nominated beneficiaries or pension income payments to their spouse, civil partner or financial dependants.From 6th April 2011 lump sum death benefits on death before the age of 75 can continue to be paid tax free if no pension benefits have been drawn but where benefits have already been taken, or the member is already age 75 or over, a 55% tax charge will apply.
The table below shows the lump sum death benefits available at a glance from 6th April 2011:
|
Death before age 75
|
Death on or after age 75 |
Fund from which no benefits have been taken (Uncrystallised Funds)
|
Tax Free up to the Lifetime Allowance |
55% tax charge |
Funds in Capped or Flexible Drawdown (Crystallised Funds)
|
55% tax charge |
55% tax charge |
In summary there is a reduction in the tax charge on death for those people age 75 or over from a possible 82% to a flat 55% tax charge whilst for those members in drawdown before the age of 75 the tax charge on lump sum death benefits has increased from 35% to 55%.
News Archive
- Annual Allowance and Carry Forward - (22/08/2011)
- Taxation of Death Benefits after 6th April 2011 - (22/08/2011)
- New Retirement Options - (22/08/2011)
- Protection from the reduced Lifetime Allowance - (22/08/2011)
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