Member dies before taking benefits
Member dies after taking benefits
The death benefits, which can be paid when you die vary, depending on whether you die before or after you take retirement benefits from your SIPP.
If you die having taken pension benefits from only part of your fund, the death benefits payable can be a mixture of those outlined below. For more details please refer to Rowanmoor Pensions.
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 you have, will be tested against the current lifetime allowance. 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 be paid tax-free in the event of death 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 your fund may be used to provide dependants’ pensions.
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 (MIR) has been satisfied;
- dependant’s scheme pension;
- dependant’s lifetime annuity.
Member dies whilst taking benefits
If you die whilst taking benefits, your 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 your dependants or nominated beneficiaries at the discretion of the trustee.
Alternatively, the whole of the fund may be used to provide your dependants with a pension. Pension benefits may be taken as follows:
- dependant’s capped drawdown;
- dependant’s flexible drawdown, when the minimum income requirement (MIR) has been satisfied;
- dependant’s scheme pension;
- dependant’s lifetime annuity.
OR
If you have no dependants, or nominated beneficiaries, your fund can be given to a charity, tax-free.
Scheme pension
Benefits can continue to be paid to your 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 (MIR) has been satisfied;
- dependant’s scheme pension;
- dependant’s lifetime annuity.
Any dependant’s pension that exceeds the annual payment you were receiving from your 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 you when buying your annuity.
This information relates to the Rowanmoor Pensions SIPP. If you have any specific queries regarding the information provided on this page please send your questions via the enquiry box on the right hand side or email us. Alternatively please read our SIPP literature for more details.
