The person who died will usually have nominated you (told their pension provider to give you money from their pension pot).
But sometimes the provider can pay the money to someone else, eg if the nominated person can’t be found or has died.
A pension from a defined benefit pot can usually only be paid to a dependant of the person who died, eg a husband, wife, civil partner or child under 23. It can sometimes be paid to someone else if the pension scheme’s rules allow it – but it will be taxed at up to 55% as an unauthorised payment.
Whether you pay tax usually depends on the:
|Payment||Type of pot||Age its owner died||Tax you usually pay|
|Most lump sums||Defined contribution or defined benefit||Under 75||No tax|
|Most lump sums||Defined contribution or defined benefit||75 or over||Income Taxdeducted by the provider|
|Trivial commutation lump sums||Defined contribution or defined benefit||Any age||Income Taxdeducted by the provider|
|Annuity or money from a new drawdown fund (set up or converted and first accessed from 6 April 2015)||Defined contribution||Under 75||No tax|
|Money from an old drawdown fund (a ‘capped’ fund or a fund first accessed before 6 April 2015)||Defined contribution||Under 75||Income Taxdeducted by the provider|
|Annuity or money from a drawdown fund||Defined contribution||75 or over||Income Taxdeducted by the provider|
|Pension provided by the scheme||Defined contribution or defined benefit||Any age||Income Taxdeducted by the provider|
You may also have to pay tax if the pension pot’s owner was under 75 when they died and any of the following apply:
You pay tax if the pot’s owner was under 75, and it’s more than 2 years after the provider is told of their death when you get either:
In both cases, the provider will deduct Income Tax before you’re paid.
You only pay tax on payments if all of the following apply:
You pay the tax yourself at:
You pay tax once on the total amount you get from the pot – HM Revenue and Customs (HMRC) will bill you for it. They do this after they’re told about the payment by the person dealing with the estate of the person who died.
The person dealing with the estate must tell HMRC within 13 months of the death or 30 days after they realise you owe tax (whichever is later).
If you buy an annuity from the pot, the provider takes Income Tax off payments before you get them.
You don’t usually pay Inheritance Tax on a lump sum because payment is usually ‘discretionary’ – this means the pension provider can choose whether to pay it to you.
Ask the pension provider if payment of the lump sum was discretionary. If it wasn’t, you may have to pay Inheritance Tax.
If you fill in a Self Assessment tax return each year, you’ll get a refund when you’ve sent your return.
If you don’t, the form you fill in to claim your refund depends on whether the payment:
There’s a different way to claim if your payment came from a trust.
Nearest tube – Elephant & Castle underground station (Northern and Bakerloo lines).
Nearest Railway Station – Elephant & Castle
Buses from Elephant and Castle – ask bus driver for Burgess Park. Bus numbers: 12, 171, 148, 176, 68, 484, 42, 40, 45