Confused about inheriting SIPP tax allowances

justme111

squirrelpie said:

DRS1 said:

FYI
Lump sum death benefits, explained | AJ Bell Investcentre

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?

https://www.gov.uk/tax-on-pension-death-benefits 

kjs31

HappyHarry 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.

Hope you don’t mind me jumping on your reply here but I have just been informed by the Prudential that my husband who died 8 years ago had a pension with them and they’ve just been informed that he’s deceased (I’m guessing as he would have been 75 last November and due to crystallise the untouched pension). I thought that I had dealt with all of his financial affairs at the time but I had no idea he had a pension with the Pru. God knows where the statements were being sent to as I don’t believe my husband ever received one since the 90s when we started living together. 

I’ve tried to get some details from the Prudential but to no avail so far as they won’t tell me anything, but they’ve told me that tax would be due if he was over 75 when he died (he wasn’t) or if “you’re paid the lump sum more than 2 years after the pension provider is told of the death”. The way it’s worded seems as if I don’t have to pay tax if the Pru have only just found out about his death but clearly he died a long time ago. 

Marcon

kjs31 said:

HappyHarry 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.

Hope you don’t mind me jumping on your reply here but I have just been informed by the Prudential that my husband who died 8 years ago had a pension with them and they’ve just been informed that he’s deceased (I’m guessing as he would have been 75 last November and due to crystallise the untouched pension). I thought that I had dealt with all of his financial affairs at the time but I had no idea he had a pension with the Pru. God knows where the statements were being sent to as I don’t believe my husband ever received one since the 90s when we started living together. 

I’ve tried to get some details from the Prudential but to no avail so far as they won’t tell me anything, but they’ve told me that tax would be due if he was over 75 when he died (he wasn’t) or if “you’re paid the lump sum more than 2 years after the pension provider is told of the death”. The way it’s worded seems as if I don’t have to pay tax if the Pru have only just found out about his death but clearly he died a long time ago. 

Here's the definition of when the two year period starts:

The relevant two-year period is defined as within two years of the earlier of:

• the day the scheme administrator first knew of the member’s death, or
• the day they could first reasonably have been expected to know of it.

If you didn't know, and the Pru only made an attempt to trace him when he (would have) reached his 75th birthday, you might have a bit of a squabble with HMRC, but fingers crossed it should be paid out tax free.