Deceased father's pension policy

Pesky_Wabbit

Hi all,

My father passed almost 8 years ago, he died interstate and with very few funds so his bank simply closed his account and wrote me a check when I provided the death certificate and proof of who I was. At the time I did not think he had any private pensions, and considered his affairs settled.

Very recently the Prudential have got in touch with me, it turns out my dad had a pension policy with them and the claim value is around £75k. From what I understand, this amount will be treated as extra income to myself and subject to my marginal rate of tax before being paid to me.

I live in Scotland, am full-time employed, and am currently in the Higher rate tax bracket of 42%. This payment will certainly push me into the Advanced rate of 45%, but is unlikely to go into the Top rate of 48%

Are there any important considerations I should make before making this claim, as this will certainly push me into a higher tax bracket?

The final claim sum will be shared equally between my younger brother (who lives in Australia) and myself.

Keep_pedalling

How old was your father when he died?

xylophone

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

Pesky_Wabbit

Pesky_Wabbit said:

This payment will certainly push me into the Advanced rate of 45%, but is unlikely to go into the Top rate of 48%

Are there any important considerations I should make before making this claim, as this will certainly push me into a higher tax bracket?

Should I post this tax reated question elsewhere in the forum? Sorry first time posting here.

QrizB

Pesky_Wabbit said:

Should I post this tax reated question elsewhere in the forum? Sorry first time posting here.

This section is fine.

As asked above, how old was your father when he died? It's important as his age at death will determine how the pension is treated for tax.

DRS1

Do they say you have to take cash now?  Can you not leave it in a pension (a beneficiary drawdown pension I think it may be called) until you need the money or are earning less.

xylophone

NOTE

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
• the lump sum is above the pension pot owner’s lump sum and death benefit allowance
• they died before 3 December 2014 and you buy an annuity from the pot

If you’re paid a lump sum more than 2 years after the provider is told of the death

You’ll need to pay Income Tax on the whole lump sum.

The pension provider will deduct any tax due before making payment to you.

Pesky_Wabbit

My father was 76 when he died, and even if he was under 75 it is 8 years since he passed - so more than the 2 year limit.

I had already researched this and know that I will definitely pay tax. Sorry if I wasn't more clear.

My question is are there any important considerations I should make before making this claim, as this will certainly push me into a higher tax bracket?

DRS1

You may want to check when the pension provider was TOLD about your father's death.  That may not have been 8 years ago.

I also refer you to my earlier post.

QrizB

Pesky_Wabbit said:

My question is are there any important considerations I should make before making this claim, as this will certainly push me into a higher tax bracket?

You might not have to take the lump sum all at once. Indeed you might not have to take any of it right now, but keep it invested until you need it (potentially even when you retire yourself).

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/pensions-after-death

xylophone

You might not have to take the lump sum all at once. Indeed you might not have to take any of it right now, but keep it invested until you need it (potentially even when you retire yourself).

The OP says

The final claim sum will be shared equally between my younger brother (who lives in Australia) and myself.

If father did not nominate just the OP as beneficiary, would not the Trustees in fairness share the pension between both?

Complications?

https://sjb-global.com/uk-pension-non-uk-resident-beneficiary/