Section 637M — Income Tax (Earnings and Pensions) Act 2003: Flexi-access drawdown lump sum death benefits

Flexi-access drawdown lump sum death benefits 637M 1 Subject to subsections (2) to (6), no liability to income tax arises on a flexi-access drawdown lump sum death benefit paid under a registered pension scheme.

2 If—

a a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is paid before the end of the relevant two year period, and c the lump sum exceeds the permitted maximum, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

3 If—

a a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is not paid before the end of the relevant two year period, and c the lump sum is paid to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

4 If—

a a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, b the lump sum is not paid before the end of the relevant two year period, and c the lump sum is paid to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

5 If a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid—

a in respect of a member who, on death, is 75 or over, and b to a qualifying person, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

6 If a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid—

a in respect of a member who, on death, is 75 or over, and b to a non-qualifying person, the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

7 A reference in this section to a “member”—

a in relation to a flexi-access drawdown lump sum death benefit under paragraph 17A(2) of Schedule 29 to FA 2004 (lump sum payable on death of dependant of deceased member), is a reference to the dependant on whose death the lump sum is payable;

b in relation to a flexi-access drawdown lump sum death benefit under paragraph 17A(3) or (4) of Schedule 29 to FA 2004 (lump sum payable on death of nominee or successor of deceased member), is a reference to the nominee or successor on whose death the lump sum is payable.

8 In this section— “ non-qualifying person ” has the same meaning as in section 206 of FA 2004; “ the permitted maximum ”, in relation to a flexi-access drawdown lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available on the lump sum being paid (see section 637S); “ qualifying person ” means a person who is not a non-qualifying person; “ the relevant two year period ” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it.