Taxation of pension death benefits
In this article we explore the four taxes that can be applied to pension death benefits.
- On death before age 75 the benefits can be paid as a lump sum or as a drawdown pension to any beneficiary tax-free, irrespective of whether they come from uncrystallised or crystallised benefits.
- On death after age 75 the benefits can be drawn down or paid as a lump sum taxed at the beneficiary’s marginal rate.
- On death after age 75 the benefits can be paid as a lump sum to a trust with a 45% tax charge.
- On death before age 75 any beneficiary can receive the payments tax-free.
- On death after age 75 any beneficiary can receive the payments taxed at their marginal rate.
HMRC Pensions Tax Manual: Death benefits (opens in a new window)
HMRC Pensions Tax Manual: Benefit crystallisation events (opens in a new window)
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.