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Confused about inheriting SIPP tax allowances

Hello, I have inherited a SIPP and I am really confused on the tax rules, I am at my wits' end.

I have been getting conflicting information - some sources write that if the SIPP owner died before 75, you can leave the funds in the pension pot and withdraw anytime tax-free, even in, say, 50 years.

Others say that anything taken after only 2 years have passed is subject to tax.

This is taken directly from HMRC Gov website:

"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’re paid the lump sum more than 2 years after the pension provider is told of the death .."
Firstly, they don't mention if a drawdown would follow the same rules. Secondly, very ambiguous - "may"!

Even the IFA who I had an initial consultation with wasn't certain.

Could someone who is knowledgeable in this field clarify once and for all please?

Or if not, suggest who would be able to help?
The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
Often people seem to use this word mistakenly where "quandary" would fit better.
«1

Comments

  • HappyHarry
    HappyHarry Posts: 1,739 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper
    edited 28 November 2024 pm30 9:34PM
    If you have inherited a pension from someone that died before the age of 75 then you can draw on it tax free whenever you want to. That could be immediately, in 2 years or in 50 years.

    If the pension has not been passed to you within 2 years of death then there are penalties to be paid by the pension provider - they will be very keen to ensure this does not happen. I have never known such a delay.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • justme111
    justme111 Posts: 3,531 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    If you have inherited a pension from someone that died before the age of 75 then you can draw on it tax free whenever you want to. That could be immediately, in 2 years or in 50 years.

    If the pension has not been passed to you within 2 years of death then there are penalties to be paid by the pension provider - they will be very keen to ensure this does not happen. I have never known such a delay.
    Thank you. So when HMRC mentions being paid a lump sum within 2 years is important, they really mean having the pension delegated to you within 2 years is important? If this is the case then that's awful wording.
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
  • DRS1
    DRS1 Posts: 586 Forumite
    Part of the Furniture 500 Posts Name Dropper Combo Breaker
    There used to be a thing with occupational pension schemes where you had to pay death benefits within 2 years of death for ?IHT? reasons.  Maybe this is that sort of thing?
  • justme111 said:
    If you have inherited a pension from someone that died before the age of 75 then you can draw on it tax free whenever you want to. That could be immediately, in 2 years or in 50 years.

    If the pension has not been passed to you within 2 years of death then there are penalties to be paid by the pension provider - they will be very keen to ensure this does not happen. I have never known such a delay.
    Thank you. So when HMRC mentions being paid a lump sum within 2 years is important, they really mean having the pension delegated to you within 2 years is important? If this is the case then that's awful wording.
    Yes that is correct, and it is poor wording.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • DRS1
    DRS1 Posts: 586 Forumite
    Part of the Furniture 500 Posts Name Dropper Combo Breaker
    I suspect when the Revenue say lump sum they mean lump sum.  
  • justme111
    justme111 Posts: 3,531 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    edited 28 November 2024 pm30 10:41PM
    justme111 said:
    If you have inherited a pension from someone that died before the age of 75 then you can draw on it tax free whenever you want to. That could be immediately, in 2 years or in 50 years.

    If the pension has not been passed to you within 2 years of death then there are penalties to be paid by the pension provider - they will be very keen to ensure this does not happen. I have never known such a delay.
    Thank you. So when HMRC mentions being paid a lump sum within 2 years is important, they really mean having the pension delegated to you within 2 years is important? If this is the case then that's awful wording.
    Yes that is correct, and it is poor wording.
    This is brilliant news! It means I can leave the pension where it is instead of having to slowly draw it out in batches until it's all transferred to my S&S ISA. Thank you very much.
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
  • justme111 said:
    justme111 said:
    If you have inherited a pension from someone that died before the age of 75 then you can draw on it tax free whenever you want to. That could be immediately, in 2 years or in 50 years.

    If the pension has not been passed to you within 2 years of death then there are penalties to be paid by the pension provider - they will be very keen to ensure this does not happen. I have never known such a delay.
    Thank you. So when HMRC mentions being paid a lump sum within 2 years is important, they really mean having the pension delegated to you within 2 years is important? If this is the case then that's awful wording.
    Yes that is correct, and it is poor wording.
    This is brilliant news! It means I can leave the pension where it is instead of having to slowly draw it out in batches until it's all transferred to my S&S ISA. Thank you very much.
    Yes.
    .
    .
    .
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • DRS1 said:
    Having read the links provided, and as a layman, I think you're right and HMRC were talking about lump sums. @justme111 where did you find your HMRC quote?
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