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  • FIRST POST
    • TcpnT
    • By TcpnT 9th Apr 18, 1:39 PM
    • 148Posts
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    TcpnT
    Taxation of widow's pension from deferred DB schemes
    • #1
    • 9th Apr 18, 1:39 PM
    Taxation of widow's pension from deferred DB schemes 9th Apr 18 at 1:39 PM
    I am helping out a relative whose husband has recently died with 3 deferred DB pensions. Total annual value of the spouse's pensions payable immediately will be around 35K. There is also a discretionary death benefit lump sum payment to her of 235k from one scheme. She is still relatively young at 50.

    I am just considering the various tax implications of these payments to her. I would be grateful for any comments on my thoughts below.

    1. I believe that the discretionary lump sum payment to her will be entirely tax free as far as she is concerned. However I'm not clear whether it will count towards his lifetime allowance test on death ?

    2. I believe that the value of the annual pension paid to her will be tested against his lifetime allowance. If so is this at the standard 20X multiplier ? Even if the pension and the lump sum both count towards his lifetime allowance I believe that there should be no LTA charge as the total value will be below 1m ?

    3. I believe that neither the pension nor the lump sum will count towards her lifetime allowance under any circumstances and that she will still have her own full LTA to be used against any pension earned in her own right in the past or future. Is this correct ?

    4. I know that a DC pension fund inherited by a spouse after a death below age 75 can be drawn free of income tax but am I right in thinking that this does not apply to DB spouses's pension and that the income will be taxable in the same way as any other income she receives ?

    Any other comments on this scenario ?

    Thanks
Page 1
    • Dox
    • By Dox 9th Apr 18, 1:47 PM
    • 938 Posts
    • 719 Thanks
    Dox
    • #2
    • 9th Apr 18, 1:47 PM
    • #2
    • 9th Apr 18, 1:47 PM
    How sad to lose her husband when she is so young and presumably he was.

    Could I suggest that rather than hoping for fully accurate answers on this forum, you might like to ring TPAS https://www.pensionsadvisoryservice.org.uk for free, impartial help? What you're asking isn't entirely a set of yes/no answers, so it may be less distressing for her if this is progressed by telephone, possibly with the pair of you at one end of the line and a TPAS adviser on the other. Full contact info on their website using the link above.
    • TcpnT
    • By TcpnT 9th Apr 18, 2:00 PM
    • 148 Posts
    • 88 Thanks
    TcpnT
    • #3
    • 9th Apr 18, 2:00 PM
    • #3
    • 9th Apr 18, 2:00 PM
    Could I suggest that rather than hoping for fully accurate answers on this forum, you might like to ring TPAS https://www.pensionsadvisoryservice.org.uk for free, impartial help? What you're asking isn't entirely a set of yes/no answers, so it may be less distressing for her if this is progressed by telephone, possibly with the pair of you at one end of the line and a TPAS adviser on the other. Full contact info on their website using the link above.
    Thanks. I do take your point. We will be taking professional advice in due course but at the moment I am just collecting background information for questions that I know are going to come up. i prefer to get things reasonably clear in my own mind before talking to an expert. She definitely will not be taking part in or reading this forum discussion.
    • Dox
    • By Dox 9th Apr 18, 2:04 PM
    • 938 Posts
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    Dox
    • #4
    • 9th Apr 18, 2:04 PM
    • #4
    • 9th Apr 18, 2:04 PM
    TPAS is there to provide expertise for non-experts - their job is to help non-pensions people get things clear in their own minds, so it could be quicker and lot less frustrating if you give them a call - but if you prefer to rely on a public forum, where you might not always get correct answers, then of course that's your call.
    • xylophone
    • By xylophone 9th Apr 18, 7:49 PM
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    xylophone
    • #5
    • 9th Apr 18, 7:49 PM
    • #5
    • 9th Apr 18, 7:49 PM
    https://www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/bereavement-what-to-do/lump-sum-on-death

    https://www.xeroxpensions.co.uk/tax3.asp?url=522.asp

    However, State benefits and pensions which you receive in respect of anyone else such as a widow's, widower's or civil partner's pension do not count towards the LTA.

    https://www.civilservicepensionscheme.org.uk/media/30022/dbt_march-13.pdf

    Pensions payable to dependants following the death of a member do not count towards the LTA of either the deceased member or the person receiving the pension.

    Above seems relevant?
    • TcpnT
    • By TcpnT 9th Apr 18, 8:28 PM
    • 148 Posts
    • 88 Thanks
    TcpnT
    • #6
    • 9th Apr 18, 8:28 PM
    • #6
    • 9th Apr 18, 8:28 PM
    Above seems relevant?
    Yes - thank you.

    I did actually call TPAS who were helpful. They actually misinformed me on one point but then phoned back an hour later to correct themselves, which impressed me.
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