Declaring who you want the payments to go to
If you die, your Self-Invested Personal Pension benefits will be paid to your beneficiaries – either as a lump sum or an ongoing pension. You’ll need to complete a nomination form declaring who you want the payments to go to. The tax treatment of any death benefits paid from your SIPP will depend on your circumstances.
If you die before the age of 75
Upon receipt of a death certificate, the investments held under your SIPP will be realised and their full cash value used to provide benefits for your spouse or registered civil partner, dependants, family members, or other beneficiaries nominated by you for this purpose.
The scheme trustees will decide who will receive benefits and the form of the benefits, in their absolute discretion. However, they will take into account any wishes you have expressed through the completion of a death benefit expression of wish. You may complete a new nomination at any time.
A beneficiary can usually elect to receive their benefit as a lump sum or a flexi-access dependant’s pension. Alternatively, they may be able to use it to purchase a dependant’s annuity with an insurance company of their choosing.
Payments of death benefits are normally free of any Income Tax or Inheritance Tax, but there is no guarantee that this will be the case.
Any amount of the fund over your personal lifetime allowance may be subject to a tax charge, which will be determined by your personal representatives. If a beneficiary dies whilst still in receipt of the death benefits you bequeathed them, then the remaining benefits will be paid to a successor.
The successor or successors will be selected by the scheme trustees in their absolute discretion and can be anyone appointed by the beneficiary or selected by the scheme trustees in light of the beneficiary’s personal circumstances.
If you die after age 75
If you die after age 75, then the process is the same as described above. A tax charge will be levied upon payment of the benefits, however.
Payments will be taxed in accordance with PAYE based on the recipient’s marginal rate. If you do not leave a surviving spouse, registered civil partner or dependants, then the value of your fund may be paid to a charity nominated by you for this purpose. Any funds paid to a charity will be exempt from tax.
If you die after the age of 75, any subsequent payment of death benefits are not subject to the lifetime allowance.