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HMRC internal manual

Pensions Tax Manual

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HM Revenue & Customs
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Death benefits: Types of pension: dependants' drawdown pension: Death of the dependant (up to 5 April 2015)

Glossary PTM000001
   

 

Death of dependant

Note: a dependant’s flexible drawdown fund in existence immediately before 6 April 2015 is from that date automatically treated as a flexi-access drawdown fund, which have different rules.

Note: dependant’s capped drawdown that began on or before 5 April 2015 may continue, providing there have been no events since that date resulting in its conversion to flexi-access drawdown. But no new dependants’ capped drawdown funds or dependants’ flexible drawdown funds may be set up from 6 April 2015 onwards.

See page PTM072400 for guidance on dependants’ flexi-access drawdown funds.

Death of dependant

Paragraphs 22(1)(a) and 24(5) Schedule 28 Finance Act 2004

Paragraph 17(2) of Schedule 29 Finance Act 2004

When a person with a dependants’ drawdown pension dies, the drawdown pension year in which they die is the last drawdown pension year and the year ends immediately before the dependant dies.

Any funds remaining in that dependants’ drawdown pension fund may then be:

  • used to pay a drawdown pension fund lump sum death benefit taxed at 55 per cent (see PTM073500 for more detail) regardless of the age of the dependant
  • designated to provide a drawdown pension for any other dependant of the member at the time of the member’s death (depending on that dependant’s current age), or
  • used to provide that or those other dependant(s) with a dependant’s annuity (or where provided) a dependants’ scheme pension.

Where the second option is chosen and the other dependant is already in receipt of a dependant’s drawdown pension in respect of the deceased member, then the funds being designated from the deceased dependant’s dependants’ drawdown pension fund will be absorbed into their existing dependants’ drawdown pension fund so that there is a single fund for that dependant.

If the other dependant has not yet reached age 75, the additional fund designation will trigger a review of the maximum dependants’ drawdown pension payable in the current pension year and in any subsequent pension year(s) in the reference period. If the additional fund designation takes place in a drawdown pension year beginning after the other dependant has reached age 75, the maximum drawdown pension payable in the current pension year has to be recalculated. See PTM072340 for more detail.