Member dies before taking benefits
Member dies after taking benefits
The benefits, which can be paid when a member dies vary, depending on whether the member dies before, or after, taking retirement benefits from the scheme.
If a Family Pension Trust member dies having taken pension benefits from only part of their fund, the death benefits payable can be a mixture of those outlined below. Any dependants’ pensions will be taxed as earned income.
Member dies before taking benefits
If a member dies before taking benefits, the total value of their Family Pension Trust fund and any other pension arrangements they have, will be tested against the current lifetime allowance. Death benefits will be paid to a member’s dependants or nominated beneficiaries at the discretion of the trustees.
A lump sum, up to the current lifetime allowance, can normally be paid, tax-free before age 75. Funds in excess of the lifetime allowance may also be paid as a cash lump sum, but will be taxed at 55%. From age 75 all lump sum payments will be taxed at 55%.
Alternatively, the whole of the fund may be used to provide dependants’ pensions.
Any Dependants‘ pensions will be taxed as earned income. Pension benefits may be taken as follows:
- dependant’s capped drawdown;
- dependant’s flexible drawdown, when the minimum income requirement has been satisfied;
- dependant’s scheme pension;
- dependant’s lifetime annuity.
Member dies whilst taking benefits
If a member dies whilst taking benefits, their death benefits will depend upon the type of pension benefit in payment. Any dependants’ pensions will be taxed as earned income.
Capped drawdown and flexible drawdown
A lump sum death benefit can be paid from the fund. This lump sum death benefit is the full value of the fund less tax at 55% and is paid to the member’s dependants or nominated beneficiaries at the discretion of the trustees.
Alternatively, the whole of the fund may be used to provide dependants’ pensions. Pension benefits may be taken as follows:
- dependant’s capped drawdown;
- dependant’s flexible drawdown when the minimum income requirement has been satisfied;
- dependant’s scheme pension;
- dependant’s lifetime annuity;
OR
If there are no dependants, or nominated beneficiaries, the fund can be given to a charity, tax-free.
Scheme pension
Benefits can continue to be paid to a member’s dependants, or nominated beneficiaries, until the end of any guarantee period. Once the guarantee period is over benefits may be taken as follows:
- cash lump sum based on the original fund less any pension payments already paid, less tax at 55%;
- dependant’s capped drawdown;
- dependant’s flexible drawdown when the minimum income requirement has been satisfied;
- dependant’s scheme pension;
- dependant’s lifetime annuity.
Any dependant’s pension that exceeds the annual payment the member was receiving from their scheme pension may be subject to an additional tax charge.
Lifetime and short term annuities
Death benefits will vary and will be based upon the options selected by the member when buying their annuity.
This information relates to the Rowanmoor Pensions Family Pension Trust (Family SIPP). If you have any specific questions regarding the information provided on this page please contact us, email us or send your questions via the enquiry box on the right hand side. Alternatively please read our Family Pension Trust literature for more details.
