Widows military pension

faybijou

Hi all. Can anyone tell me if a lump sum widows pension should attract a Tax Free %?
I opted to take a lump sum, rather than a monthly payment, after my husband died, but have been taxed on the whole amount. Everything I read online (including the governments own websites) tell me that a "Trivial Commutation" payment should attract a 25% tax free payment, with the rest being taxed at your basic rate. The army pensions people are telling me it's to be taxed! It's not a huge amount in the grand scheme of things, but it's going to make a lot of difference to me.
Thanks for any help.

xylophone

See https://www.pensionsadvisoryservice.org.uk/content/spotlights-files/uploads/Death_benefits_commutation_SPOT014_V1.3.pdf


When can a trivial commutation lump sum death benefit be paid?

If your partner died on or after 6 April 2011 then a trivial commutation lump sum death benefit can be paid whatever their age was when they died. There is no time limit for making the payment. You can commute a dependant’s pension that is just about to start or one that is already being paid.

Who can be paid a trivial commutation lump sum death benefit?

The person who was due to be paid the dependant’s pension should get this lump sum.

Is a trivial commutation lump sum death benefit tested against the lifetime allowance?
No.

How is a trivial commutation lump sum death benefit taxed?

The whole lump sum is taxable as if it was part of your income. The pension scheme administrator should deduct the tax from the lump sum payment before it is paid to you.

faybijou

Thanks. Yes. That's what they're telling me, but a Trivial Commutation from any other pension provider has that 25% tax free amount. Doesn't seem right that I get taxed on the whole lot!!!

greatkingrat

Was your husband already claiming the pension when he died? If so, the tax free lump sum will have already been taken when your husband originally retired. When a pension is transferred to a widow, you don't then get another tax free lump sum.

Silvertabby

Army pensions are right - a spouse's trivial commutation lump sum is all taxable, as the 25% tax free concession (for want of a better word) only applies to the pension holder.

This is standard practice.

faybijou

Thanks all. I'm more upset that the pompous lot on the phone are right, than the 25% not relating to my pension. HMRC were surprised I'd been taxed on all of it!
One more question, if I may? I also received what there was on his work pension - but got that tax free; does that mean I'm going to end up with a tax bill at the end of the year?

xylophone

See
https://www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/bereavement-what-to-do/what-happens-when-i-die

Is your situation as described in "Defined Contribution Scheme" as in above?

faybijou

That's exactly my situation. Thank you so much - it explains it all.
Why couldn't they have just explained that to me on one of the several occasions I called them!
I just need to check that he wasn't taxed when he took his pension now.

Thanks all. I knew I'd get the answer on here - you're stars, especially xylophone for the links.