The over or under age 75 rule

Sterlingtimes

There is a rule that if the SIPP holder is under age 75, then the spouse or children may draw from the SIPP upon death of the spouse or parent without paying income tax. Is this part of the LTA regime, or is it a separate rule?

Albermarle

It is called a beneficiary pension, and not connected with LTA. Except that an LTA test would have been done against the pension on death, but not anymore.

The rule about 'under 75' has been mentioned by the IFS as part of its overall criticism of over generous tax treatment of pensions on death . So may come under scrutiny at some point.

Malthusian

Albermarle said:

It is called a beneficiary pension, and not connected with LTA. Except that an LTA test would have been done against the pension on death, but not anymore.

To be pedantic, an LTA test will be done on death before April 2024, but the LTA charge that can result is 0 from April 2023. After April 2024 there will be no LTA test. Unless Sir Keir brings it back.
It is too early to say whether this is a distinction without a difference.

Marcon

Sterlingtimes said:

There is a rule that if the SIPP holder is under age 75, then the spouse or children may draw from the SIPP upon death of the spouse or parent without paying income tax. Is this part of the LTA regime, or is it a separate rule?

That's not quite the position. The SIPP trustees will decide who inherits the SIPP on the death of the SIPP holder, guided by the Expression of Wish/Nomination Form the SIPP holder has (hopefully) completed. The discretionary nature of the payment avoids IHT. Any payments, whether taken as a one-off lump sum or in smaller amounts, will be free of income tax, provided they are paid over (as opposed to paid out) to the beneficiaries within two years of the SIPP holder's death.