Part 4

Pension schemes etc
Chapter 5

Registered pension schemes: tax charges

Charges on authorised payments

Special lump sum death benefits charge
206
1
A charge to income tax, to be known as the special lump sum death benefits charge, arises where—
a
a pension protection lump sum death benefit,
b
an annuity protection lump sum death benefit, ...
c
a drawdown pension fund lump sum death benefit,
or
d
a flexi-access drawdown fund lump sum death benefit,
is paid , to a non-qualifying person, by a registered pension scheme in respect of a member who had reached the age of 75 at the date of the member's death.
1ZA
In subsection (1) the reference to a member (and to the member's death) are to be read—
a
in relation to—
i
a drawdown pension fund lump sum death benefit under paragraph 17(2) of Schedule 29, or
ii
a flexi-access drawdown fund lump sum death benefit under paragraph 17A(2) of Schedule 29,
as a reference to a dependant (and to the dependant's death),
b
in relation to a flexi-access drawdown fund lump sum death benefit under paragraph 17A(3) of Schedule 29, as a reference to a nominee (and to the nominee's death), and
c
in relation to a flexi-access drawdown fund lump sum death benefit under paragraph 17A(4) of Schedule 29, as a reference to a successor (and to the successor's death).
1A
The special lump sum death benefits charge also arises where—
a
a defined benefits lump sum death benefit, or
b
an uncrystallised funds lump sum death benefit,
is paid
, to a non-qualifying person,
by a registered pension scheme in respect of a member who had reached the age of 75 at the date of the member's death.
1B
The special lump sum death benefits charge also arises where—
a
a lump sum death benefit is paid
, to a non-qualifying person,
by a registered pension scheme in respect of a member of the scheme who had not reached the age of 75 at the date of the member's death,
b
the lump sum death benefit is—
i
a drawdown pension fund lump sum death benefit under paragraph 17(1) of Schedule 29,
ii
a flexi-access drawdown fund lump sum death benefit under paragraph 17A(1) of Schedule 29,
iia
a defined benefits lump sum death benefit,
or
iii
an uncrystallised funds lump sum death benefit, and
c
the lump sum death benefit is not paid before the end of the period of two years beginning with the earlier of the day on which the scheme administrator of the scheme first knew of the member's death and the day on which the scheme administrator could first reasonably have been expected to have known of it.
1C
The special lump sum death benefits charge also arises where—
a
a lump sum death benefit is paid
, to a non-qualifying person,
by a registered pension scheme on the death of a dependant, nominee or successor of a deceased member of the scheme,
b
the dependant, nominee or successor (“
the beneficiary
”) had not reached the age of 75 at the date of the beneficiary's death,
c
the lump sum death benefit is—
i
a drawdown pension fund lump sum death benefit under paragraph 17(2) of Schedule 29, or
ii
a flexi-access drawdown fund lump sum death benefit under paragraph 17A(2), (3) or (4) of Schedule 29, and
d
the lump sum death benefit is not paid before the end of the period of two years beginning with the earlier of the day on which the scheme administrator of the scheme first knew of the beneficiary's death and the day on which the scheme administrator could first reasonably have been expected to have known of it.
2
The person liable to the special lump sum death benefits charge is the scheme administrator.
3
The scheme administrator is liable to the special lump sum death benefits charge whether or not—
a
the scheme administrator, and
b
the person to whom the lump sum death benefit is paid,
are resident ... ... in the United Kingdom.
4
The rate of the charge is 45% in respect of the lump sum death benefit.
5
The Treasury may by order increase or decrease the rate for the time being specified in subsection (4).
6
Tax under this section is to be charged on the amount of the lump sum paid or, if the rules of the pension scheme permit the scheme administrator to deduct the tax before payment, on the amount of the lump sum before deduction of tax.
7
A lump sum death benefit in respect of which income tax is charged under this section is not to be treated as income for any purpose of the Tax Acts
(but see subsection (8)).
8
Where—
a
a lump sum death benefit in respect of which tax is charged under this section is one paid to a non-qualifying person in the person's capacity as a trustee, and
b
a payment of any part of the lump sum is made out of a settlement to a beneficiary who is an individual,
the amount received by the beneficiary, together with so much of the tax charged under this section on the lump sum as is attributable to the amount received by the beneficiary, is income of the beneficiary for income tax purposes but the beneficiary may claim to deduct that much of that tax from the income tax charged on the beneficiary's total income for the tax year in which the payment is made to the beneficiary.
9
For the purposes of this section, a person is a “
non-qualifying person
” in relation to payment of a lump sum if—
a
the person is not an individual, or
b
the person is an individual and the payment is made to the person in the person's capacity as—
i
a trustee or personal representative,
ii
a director of a company,
iii
a partner in a firm, or
iv
a member of a limited liability partnership,
except that a person is not a “
non-qualifying person
” in relation to payment of a lump sum if the payment is made to the person in the person's capacity as a bare trustee.
10
In subsection (9)—
- “
bare trustee
” means a person acting as trustee for—
  1. an individual absolutely entitled as against the trustee,
  2. two or more individuals who are so entitled,
  3. an individual who would be so entitled but for being a minor or otherwise lacking legal capacity, or
  4. two or more individuals who would be so entitled but for all or any of them being a minor or otherwise lacking legal capacity,
- “director” is read in accordance with section 452 of CTA 2010, and
- references to a firm are to be read in the same way as references to a firm in Part 9 of
ITTOIA
2005 (which contains special provision about partnerships).
Pt. 4 modified (N.I.) (1.4.2006) by The Firemens Pension Scheme Order (Northern Ireland) 2006 (S.R. 2006/210), arts. 1(2), 103
S. 206 modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1
Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 9, 10
Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 12
Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 13(5)
Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 26
Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284
S. 206 applied by S.R. 1995/95, reg. 89A(10) (as inserted (N.I.) (with effect in accordance with reg. 1(2) of the amending Rule) by The Health and Personal Social Services (Superannuation Scheme, Injury Benefits and Additional Voluntary Contributions) (Amendment) Regulations (Northern Ireland) 2006 (S.R. 2006/410), regs. 1(2), 16)
Pt. 4 modified (31.12.2007) by Police and Justice Act 2006 (c. 48), s. 53(1), Sch. 3 para. 7; S.I. 2007/3203, art. 3(b)
Pt. 4 modified (1.7.2008) (N.I.) (with effect in accordance with reg. 1 of the amending Rule) by The Health and Social Care (Pension Scheme) Regulations (Northern Ireland) 2008 (S.R. 2008/256), regs. 1, 124(1) (with regs. 134, 258)
Pt. 4 modified by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), reg. 5A (as inserted (6.4.2006) by S.I. 2008/2990, arts. 1(1), 3)
Pt. 4 applied (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 18
Pt. 4 modified (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(3)
S. 206(1A) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 41(3)
S. 206(1)(c) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 41(2)
Pt. 4 applied (with modifications) (with application in accordance with Sch. 22 para. 1 of the amending Act) by Finance Act 2013 (c. 29), Sch. 22 para. 1(2)
Words in s. 206(3) omitted (with effect in accordance with Sch. 46 para. 132 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 123
Pt. 4 modified (17.7.2014) by Finance Act 2014 (c. 26), Sch. 6 para. 1(2)(3)
Pt. 4: power to amend conferred (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), s. 4(3)
Words in s. 206(1) inserted (17.12.2014) (with application in accordance with s. 2(5) of the amending Act) by Taxation of Pensions Act 2014 (c. 30), s. 2(2)
Word in s. 206(4) substituted (17.12.2014) (with application in accordance with s. 2(5) of the amending Act) by Taxation of Pensions Act 2014 (c. 30), s. 2(3)
Word in s. 206(1)(b) omitted (17.12.2014) by virtue of Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 13(a)
S. 206(1)(d) and preceding word inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 13(b)
S. 206(1B)(1C) inserted (17.12.2014) (with application in accordance with Sch. 2 para. 20 of the amending Act) by Taxation of Pensions Act 2014 (c. 30), Sch. 2 para. 17(3)
S. 206(1ZA) inserted (17.12.2014) (with application in accordance with Sch. 2 para. 20 of the amending Act) by Taxation of Pensions Act 2014 (c. 30), Sch. 2 para. 17(2)
S. 206(7) substituted (17.12.2014) (with application in accordance with Sch. 2 para. 20 of the amending Act) by Taxation of Pensions Act 2014 (c. 30), Sch. 2 para. 17(4)
S. 206(8)-(10) inserted (with effect in accordance with s. 21(10) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 21(5)
Words in s. 206(7) inserted (with effect in accordance with s. 21(10) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 21(4)
Words in s. 206(1) inserted (with effect in accordance with s. 21(10) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 21(2)
Words in s. 206(1A) inserted (with effect in accordance with s. 21(10) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 21(2)
Words in s. 206(1B)(a) inserted (with effect in accordance with s. 21(10) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 21(2)
Words in s. 206(1C)(a) inserted (with effect in accordance with s. 21(10) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 21(2)
S. 206(1B)(b)(iia) inserted (with effect in accordance with s. 21(10) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 21(3)
Pt. 4 modified (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 1
Pt. 4 modified (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 9(2)
S. 206(1B) modified (6.4.2023) by The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2023 (S.I. 2023/113), regs. 1(2), 31 (with reg. 1(3))
S. 206(1B) modified (13.2.2025 with effect in relation to the tax year 2024-25 and subsequent tax years) by The MPs’, Senedd and Assembly Pension Schemes (Tax) Regulations 2025 (S.I. 2025/52), regs. 1(2)(3), 5
Pt. 4 modified (with effect in relation to the tax year 2024-25 and subsequent tax years) by The MPs’, Senedd and Assembly Pension Schemes (Tax) Regulations 2025 (S.I. 2025/52), regs. 1(2)(3), 6
Words in s. 206(3) omitted (for the tax year 2025-26 and subsequent tax years) by virtue of Finance Act 2025 (c. 8), s. 40(4), Sch. 9 para. 15(3)(b)