Sipp inherited by Spouse

SVaz

Assuming Pre age 75 and under the LTA. 

Is it inherited free of any kind of tax regardless of whether the Sipp is uncrystallised, part or fully crystallised? 

How do Sipp companies treat it, does it get a special nil rate tax code etc.

Does the spouse have to start drawing from it before they hit 75 to remain tax free?

I’m envisioning a scenario where Spouse draws their personal allowance + tfc yearly from their own Sipp until it’s empty or until State pension then starts drawing from the inherited Sipp .  

The things you think about after a health scare! 

tacpot12

Payments from any uncrystallised funds will only be tax free if the funds are designated for drawdown within two years of the scheme administrator first knowing about the member's death, so your spouse would need to crystalise the pot within two years or so - make sure she knows this, and write it down and keep it with your Will. (Source DC scheme death benefits)

There is a lot of useful information in the link. Have a good read. 

You will be aware of the current government's proposal to charge inheritance tax on private pensions.

The SIPP providers just mark the withdrawals as being tax free. I do a monthly drawdown from my SIPP using UFPLS, so I receive 25% of the payments tax free, and the SIPP provider calculates the tax due on the other 75% using their PAYE software. For payments in the circumstances you describe, they would just regard 100% of the withdrawal as being tax free. No need for a special tax code. 

Whether or not withdrawals are tax free only depends on the age of the person who has left the pension. You can draw on inherited pensions at any age (from 0 years old and upwards) but if it is not tax free (because you were 75 years or older when you died) , they will pay tax at their marginal rate which means that for people who are already paying a higher rate of tax, it can be beneficial to wait to draw on their inherited pension until they have become a basic rate tax payer again.

Linton

SVaz said:

Assuming Pre age 75 and under the LTA. 

Is it inherited free of any kind of tax regardless of whether the Sipp is uncrystallised, part or fully crystallised? 

How do Sipp companies treat it, does it get a special nil rate tax code etc.

Does the spouse have to start drawing from it before they hit 75 to remain tax free?

I’m envisioning a scenario where Spouse draws their personal allowance + tfc yearly from their own Sipp until it’s empty or until State pension then starts drawing from the inherited Sipp .  

The things you think about after a health scare! 

Yes an inherited under 75 DC pension is usually tax free. Details are given in https://www.gov.uk/tax-on-pension-death-benefits.  There is one exception ;listed there when the pension was first accessed prior to April 2015. 

AIUI it is categorised separately as a beneficiary's pension by the SIPP platforms.

There are no age restrictions on when the beneficiary can access the pension.