Self-Invested Personal Pension
Death Benefits
Member dies before taking benefits
If you die before taking benefits from your fund, the total value of your SIPP and any other pension arrangements, including protected rights, will be tested against the current lifetime allowance.
NON-PROTECTED RIGHTS BENEFITS
Death benefits will be paid to your dependants or nominated beneficiaries at the discretion of the trustee.
A lump sum, up to the current lifetime allowance, can normally be paid tax-free. Funds in excess of the lifetime allowance may also be paid as a cash lump sum, but will be taxed at 55%.
Alternatively, the whole fund may be used to provide dependants' pensions. Any dependants' pensions will be taxed as earned income. Pension benefits may be taken as follows:
- a dependant's annuity;
- a dependant's unsecured pension (where the dependant is under age 77);
- a dependant's alternatively secured pension (where the dependant is age 77 or over);
- a dependant's scheme pension.
PROTECTED RIGHTS BENEFITS
Benefits must be used to provide your spouse or civil partner with an income. If you do not have a spouse or civil partner, any protected rights fund will be paid as a lump sum to your nominated beneficiaries, or to your estate if there are no nominated beneficiaries. Lump sum death benefits may be subject to inheritance tax.
Member dies after taking benefits
The death benefits payable will depend on the type of pension benefit being taken.
Member dies after taking lifetime annuity
Death benefits will vary and will be based upon the options you select when you buy your annuity.
Member dies after taking unsecured pension
NON-PROTECTED RIGHTS BENEFITS
A lump sum death benefit can be paid from the fund. This lump sum death benefit is the full value of the non-protected rights fund less tax at 35% and is paid to your dependants or nominated beneficiaries at the discretion of the trustee.
Alternatively, dependants' pensions may be provided as outlined in the section member dies before taking benefits, above.
If you die, having only taken pension benefits from part of their fund, the death benefits payable can be a mixture of those outlined above.
PROTECTED RIGHTS BENEFITS
The fund must be used to provide your spouse or civil partner with an income. If you do not have a spouse or civil partner, lump sum death benefits will be paid to your nominated beneficiaries less 35% tax. If there are no nominated beneficiaries it will be paid to your estate. Any lump sum benefit may be subject to inheritance tax.
Member dies after taking alternatively secured pension
NON-PROTECTED RIGHTS BENEFITS
A dependant's pension must be provided and will be taxed as earned income. Pension benefits may be taken as follows;
- a dependant's annuity;
- a dependant's unsecured pension (where the dependant is under age 77);
- a dependant's alternatively secured pension (where the dependant is age 77 or over);
- a dependant's scheme pension.
OR
If there are no dependants, the non-protected rights death benefits can be given to a charity, tax-free.
PROTECTED RIGHTS BENEFITS
Funds must be used to provide your spouse or civil partner with a pension, which will be treated as earned income and is therefore liable to income tax.
If you do not have a spouse or civil partner, the protected rights death benefits can be given to a charity, tax-free.
Member dies after taking scheme pension
NON-PROTECTED RIGHTS BENEFITS
Benefits can continue to be paid to your dependants until the end of any guarantee period. Once the guarantee period is over benefits may be taken as follows:
Before age 77
- a cash lump sum based on the original fund less any pension payments already paid, less
tax at 35%; - a dependant's annuity;
- a dependant's unsecured pension (where the dependant is under age 77);
- a dependant's alternatively secured pension (where the dependant is age 77 or over);
- a dependant's scheme pension.
After age 77
- a dependant's annuity;
- a dependant's unsecured pension (where the dependant is under age 77);
- a dependant's alternatively secured pension (where the dependant is age 77 or over);
- a dependant's scheme pension.
Any resulting dependant’s benefits that exceed the payment your were receiving from your scheme pension may be subject to a tax charge.
PROTECTED RIGHTS BENEFITS
If you have a spouse or civil partner when your scheme pension commences, it must make provision for 50% of your pension from protected rights funds to be paid to any surviving spouse or civil partner.
This information relates to the Rowanmoor Pensions SIPP.