Part 9Pension income

F1CHAPTER 15ALump sums under registered pension schemes

Tax treatment of authorised lump sum death benefits

637KAnnuity protection lump sum death benefits

(1)

Subject to subsections (2), (3) and (4), no liability to income tax arises on an annuity protection lump sum death benefit paid under a registered pension scheme.

(2)

If—

(a)

an annuity protection lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, and

(b)

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 an annuity protection 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.

(4)

If an annuity protection 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.

(5)

In this section—

“non-qualifying person” has the same meaning as in section 206 of FA 2004;

“the permitted maximum”, in relation to an annuity protection 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 F2on the lump sum being paid (see section 637S);

“qualifying person” means a person who is not a non-qualifying person.