Income Tax (Earnings and Pensions) Act 2003

[F1 CHAPTER 15A U.K. Lump sums under registered pension schemes

Textual Amendments

F1 Pt. 9 Ch. 15A substituted (6.4.2024 for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 41, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

Modifications etc. (not altering text)

C1 Pt. 9 modified (6.4.2023) by The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2023 (S.I. 2023/113), regs. 1(2), 23(2), 24(2), 26(2), 28(2) (with reg. 1(3))

C2 Pt. 9 Ch. 15A modified (with effect in accordance with reg. 1(3) of the amending S.I.) by S.I. 2006/569, reg. 5(1) (as substituted by The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 (S.I. 2024/356), reg. 10(2)(a))

C3 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by 2014 c. 26, Sch. 6 para. 1(2) (as substituted by Finance Act 2024 (c. 3), Sch. 9 paras. 92(3), 124 (with Sch. 9 paras. 125-132A)) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 15, 17))

C4 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by 2016 c. 24, Sch. 4 para. 1(2) (as substituted by Finance Act 2024 (c. 3), Sch. 9 paras. 93(3)(a), 124 (with Sch. 9 paras. 125-132A)) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 16(2), 17))

C5 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 6A (as inserted by Finance Act 2024 (c. 3), Sch. 9 paras. 67, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

C6 Pt. 9 Ch. 15A applied (with modifications) (6.4.2024 for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 19(1A)(1B) (as inserted by Finance Act 2024 (c. 3), Sch. 9 paras. 76(3), 124 (with Sch. 9 paras. 125-132A)) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 8(7), 17)

C7 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by 2016 c. 24, Sch. 4 para. 9(2) (as substituted by Finance Act 2024 (c. 3), Sch. 9 paras. 93(4)(b), 124 (with Sch. 9 paras. 125-132A)) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 16(3), 17))

C8 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by 2013 c. 29, Sch. 22 para. 1(2) (as substituted by Finance Act 2024 (c. 3), Sch. 9 paras. 91(3), 124 (with Sch. 9 paras. 125-132A)) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 14, 17))

C9 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 7 (as substituted by Finance Act 2024 (c. 3), Sch. 9 paras. 68, 124 (with Sch. 9 paras. 125-132A)) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 8(3), 17))

C10 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by 2011 c. 11, Sch. 18 para. 14(3) (as substituted by Finance Act 2024 (c. 3), Sch. 9 paras. 90(4), 124 (with Sch. 9 paras. 125-132A)) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 13, 17))

C11 Pt. 9 Ch. 15A excluded (for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 34 para. 5ZA (as inserted by Finance Act 2024 (c. 3), Sch. 9 paras. 60(3), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

C12 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by S.I. 2006/572, arts. 25CA-25CC (as inserted by Finance Act 2024 (c. 3), Sch. 9 paras. 95(5), 124 (with Sch. 9 paras. 125-132A)) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17, 25(16)(17)) and S.I. 2024/1167, regs. 1(2)(3), 4(9)(10))

C13 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 18 (as substituted by Finance Act 2024 (c. 3), Sch. 9 paras. 75, 124 (with Sch. 9 paras. 125-132A)) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 8(6), 17))

C14 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 29A (as inserted by Finance Act 2024 (c. 3), Sch. 9 paras. 85, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

C15 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by S.I. 2006/207, reg. 18 (as substituted by Finance Act 2024 (c. 3), Sch. 9 paras. 62(8), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4); and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17))

C16 Pt. 9 Ch. 15A modified (for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 12(3A)-(3H) (as substituted by Finance Act 2024 (c. 3), Sch. 9 paras. 71(2), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17))

C17 Pt. 9 Ch. 15A modified (18.11.2024 for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 20B (as amended by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 8(10))

C18 Pt. 9 Ch. 15A applied (with modifications) (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2010/1187, regs. 5-11( as amended) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 27(9)(b))

C19 Pt. 9 Ch. 15A modified (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2006/572, art. 7 (as substituted by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 25(3))

C20 Pt. 9 Ch. 15A modified (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2010/1187, reg. 4 (as substituted by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 27(3))

C21 Pt. 9 Ch. 15A applied (with modifications) (18.11.2024 for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 34A (as inserted by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 3) Regulations 2024 (S.I. 2024/1167), regs. 1(2)(3), 3(9) (with reg. 6))

C22 Pt. 9 modified (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2009/1171, reg. 5ZA (as inserted by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 3) Regulations 2024 (S.I. 2024/1167), regs. 1(2)(3), 5(3) (with reg. 6))

C23 Pt. 9 Ch. 15A applied (with modifications) (18.11.2024 for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 paras. 12, 12A (as amended by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 8(4)(5))

C24 Pt. 9 Ch. 15A modified (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2006/575, reg. 42B (as substituted by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 26(6))

C25 Pt. 9 Ch. 15A modified (18.11.2024 for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 20A (as amended by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 8(9))

C26 Pt. 9 Ch. 15A modified (18.11.2024 for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 20E (as amended by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 8(13))

F1 636A [F2 Exemptions and liabilities] for certain lump sums under registered pension schemes U.K.

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Textual Amendments

F2 Words in s. 636A heading substituted (with effect in accordance with Sch. 5 para. 4 of the amending Act) by Finance Act 2016 (c. 24), Sch. 5 para. 2(2)

F1 636AA Taxable lump sum death benefits U.K.

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F1 636B Trivial commutation and winding-up lump sums U.K.

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F1 636C Trivial commutation and winding-up lump sum death benefits U.K.

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Introduction U.K.

637 Introduction U.K.

(1) This Chapter makes provision about the income tax treatment of authorised lump sums and authorised lump sum death benefits.

(2) In this Chapter—

(a) “authorised lump sum” means a lump sum permitted by the lump sum rule in section 166 of FA 2004 to be paid by a registered pension scheme to a member of the scheme;

(b) “authorised lump sum death benefit” means a lump sum death benefit permitted by the lump sum death benefit rule in section 168 of that Act to be paid by a registered pension scheme in respect of a member of the scheme.

(3) Expressions used in this Chapter and Part 4 of FA 2004 (pensions etc) have the same meaning in this Chapter as in that Part.

Tax treatment of authorised lump sums U.K.

637A Pension commencement lump sums U.K.

No liability to income tax arises on a pension commencement lump sum paid under a registered pension scheme.

637B Pension commencement excess lump sums U.K.

A person to whom a pension commencement excess lump sum is paid under a registered pension scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

637C Serious ill-health lump sums U.K.

(1) Subject to subsections (2) and (4), no liability to income tax arises on a serious ill-health lump sum paid under a registered pension scheme.

(2) If—

(a) a serious ill-health lump sum is paid under a registered pension scheme to a member who (at the time of the payment) is under 75, and

(b) the lump sum exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) In subsection (2) “the permitted maximum”, in relation to a serious ill-health lump sum paid to a member, means so much of the member’s lump sum and death benefit allowance as is available [F3 on the member becoming] entitled to the lump sum (see section 637S).

(4) If a serious ill-health lump sum is paid under a registered pension scheme to a member who (at the time of the payment) is 75 or over, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

Textual Amendments

F3 Words in s. 637C(3) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(2)

637D Uncrystallised funds pension lump sums U.K.

(1) Subject to subsection (2), where an uncrystallised funds pension lump sum is paid under a registered pension scheme—

(a) no liability to income tax arises on 25% of the lump sum, and

(b) section 579A (pensions) applies in relation to the remainder of the lump sum as it applies to any pension under a registered pension scheme.

(2) If—

(a) an uncrystallised funds pension lump sum is paid under a registered pension scheme, and

(b) 25% of the lump sum is an amount that exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) In subsection (2) “the permitted maximum”, in relation to an uncrystallised funds pension lump sum paid to a member, means the lower of the following amounts—

(a) so much of the member’s lump sum allowance as is available [F4 on the member becoming] entitled to the lump sum (see section 637Q);

(b) so much of the member’s lump sum and death benefit allowance as is available [F5 on the member becoming] entitled to the lump sum (see section 637S).

Textual Amendments

F4 Words in s. 637D(3)(a) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(2)

F5 Words in s. 637D(3)(b) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(2)

637E Short service refund lump sum U.K.

A short service refund lump paid under a registered pension scheme is subject to income tax in accordance with section 205 of FA 2004 (charge to tax on scheme administrator in respect of such a lump sum) but not otherwise.

637F Refund of excess contributions lump sums U.K.

No liability to income tax arises on a refund of excess contributions lump sum paid under a registered pension scheme.

637G Trivial commutation lump sums and winding-up lump sums U.K.

(1) Subject to subsection (2), a member of a registered pension scheme to whom—

(a) a trivial commutation lump sum, or

(b) a winding-up lump sum,

is paid under the scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

(2) If, immediately before the lump sum is paid, the member has uncrystallised rights under any one or more arrangements under the pension scheme, the amount of the taxable pension income [F6 —

(a) if all the member’s rights under the pension scheme are uncrystallised rights, is 75% of the lump sum, and

(b) otherwise,] is reduced by the tax-free element (if any).

(3) In subsection (2) “the tax-free element” means 25% of the value of any uncrystallised rights extinguished by the lump sum.

(4) In this section “uncrystallised rights” has the same meaning as in section 212 of FA 2004; and the value for the purposes of this section of any uncrystallised rights is to be calculated in accordance with that section.

Textual Amendments

F6 Words in s. 637G(2) inserted (6.4.2024) by The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 (S.I. 2024/356), regs. 1(1), 2

Modifications etc. (not altering text)

C27 S. 637G modified (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2006/572, art. 37 (as amended by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 25(22))

Tax treatment of authorised lump sum death benefits U.K.

637H Defined benefits lump sum death benefits U.K.

(1) Subject to subsections (2) to (6), no liability to income tax arises on a defined benefits lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) a defined benefits lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is paid before the end of the relevant two year period, and

(c) the lump sum exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If—

(a) a defined benefits lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

(c) the lump sum is paid to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If—

(a) a defined benefits lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

(c) the lump sum is paid to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) If a defined benefits lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(6) If a defined benefits lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(7) In this section—

• “non-qualifying person” has the same meaning as in section 206 of FA 2004;

• “the permitted maximum”, in relation to a defined benefits lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available [F7 on the lump sum being] paid (see section 637S);

• “qualifying person” means a person who is not a non-qualifying person;

• “the relevant two year period” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it.

Textual Amendments

F7 Words in s. 637H(7) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(3)

637I Pension protection lump sum death benefits U.K.

(1) Subject to subsections (2), (3) and (4) no liability to income tax arises on a pension protection lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) a pension protection lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, and

(b) the lump sum exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If a pension protection lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If a pension protection lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) In this section—

• “non-qualifying person” has the same meaning as in section 206 of FA 2004;

• “the permitted maximum”, in relation to a pension protection lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available [F8 on the lump sum being] paid (see section 637S);

• “qualifying person” means a person who is not a non-qualifying person.

Textual Amendments

F8 Words in s. 637I(5) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(3)

637J Uncrystallised funds lump sum death benefits U.K.

(1) Subject to subsections (2) to (6), no liability to income tax arises on an uncrystallised funds lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) an uncrystallised funds lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is paid before the end of the relevant two year period, and

(c) the lump sum exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If—

(a) an uncrystallised funds lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

(c) the lump sum is paid to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If—

(a) an uncrystallised funds lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

(c) the lump sum is paid to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) If an uncrystallised funds lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(6) If an uncrystallised funds lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(7) In this section—

• “non-qualifying person” has the same meaning as in section 206 of FA 2004;

• “the permitted maximum”, in relation to an uncrystallised funds lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available [F9 on the lump sum being] paid (see section 637S);

• “qualifying person” means a person who is not a non-qualifying person;

• “the relevant two year period” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it.

Textual Amendments

F9 Words in s. 637J(7) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(3)

637K Annuity protection lump sum death benefits U.K.

(1) Subject to subsections (2), (3) and (4), no liability to income tax arises on an annuity protection lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) an annuity protection lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75, and

(b) the lump sum exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If an annuity protection lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If an annuity protection lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) In this section—

• “non-qualifying person” has the same meaning as in section 206 of FA 2004;

• “the permitted maximum”, in relation to an annuity protection lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available [F10 on the lump sum being] paid (see section 637S);

• “qualifying person” means a person who is not a non-qualifying person.

Textual Amendments

F10 Words in s. 637K(5) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(3)

637L Drawdown pension fund lump sum death benefits U.K.

(1) Subject to subsections (2) to (6), no liability to income tax arises on a drawdown pension [F11 fund] lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) a drawdown pension [F12 fund] lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is paid before the end of the relevant two year period, and

(c) the lump sum exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If—

(a) a drawdown pension [F13 fund] lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

(c) the lump sum is paid to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If—

(a) a drawdown pension [F14 fund] lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

(c) the lump sum is paid to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) If a drawdown pension [F15 fund] lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(6) If a drawdown pension [F16 fund] lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(7) A reference in this section to a “member”, in relation to a drawdown pension [F17 fund] lump sum death benefit under paragraph 17(2) of Schedule 29 to FA 2004 (lump sum payable on death of dependant of deceased member), is a reference to the dependant on whose death the lump sum is payable.

(8) In this section—

• “non-qualifying person” has the same meaning as in section 206 of FA 2004;

• “the permitted maximum”, in relation to a drawdown pension [F18 fund] lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available [F19 on the lump sum being] paid (see section 637S);

• “qualifying person” means a person who is not a non-qualifying person;

• “the relevant two year period” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it.

Textual Amendments

F11 Word in s. 637L(1) inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(4)

F12 Word in s. 637L(2)(a) inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(4)

F13 Word in s. 637L(3)(a) inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(4)

F14 Word in s. 637L(4)(a) inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(4)

F15 Word in s. 637L(5) inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(4)

F16 Word in s. 637L(6) inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(4)

F17 Word in s. 637L(7) inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(4)

F18 Word in s. 637L(8) inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(4)

F19 Words in s. 637L(8) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(3)

637M Flexi-access drawdown lump sum death benefits U.K.

(1) Subject to subsections (2) to (6), no liability to income tax arises on a flexi-access drawdown lump sum death benefit paid under a registered pension scheme.

(2) If—

(a) a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is paid before the end of the relevant two year period, and

(c) the lump sum exceeds the permitted maximum,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3) If—

(a) a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

(c) the lump sum is paid to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(4) If—

(a) a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid in respect of a member who, on death, is under 75,

(b) the lump sum is not paid before the end of the relevant two year period, and

(c) the lump sum is paid to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(5) If a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a qualifying person,

section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.

(6) If a flexi-access drawdown lump sum death benefit under a registered pension scheme is paid—

(a) in respect of a member who, on death, is 75 or over, and

(b) to a non-qualifying person,

the lump sum is subject to income tax under section 206 of FA 2004 (special lump sum death benefits charge on scheme administrator) but not otherwise.

(7) A reference in this section to a “member”—

(a) in relation to a flexi-access drawdown lump sum death benefit under paragraph 17A(2) of Schedule 29 to FA 2004 (lump sum payable on death of dependant of deceased member), is a reference to the dependant on whose death the lump sum is payable;

(b) in relation to a flexi-access drawdown lump sum death benefit under paragraph 17A(3) or (4) of Schedule 29 to FA 2004 (lump sum payable on death of nominee or successor of deceased member), is a reference to the nominee or successor on whose death the lump sum is payable.

(8) In this section—

• “non-qualifying person” has the same meaning as in section 206 of FA 2004;

• “the permitted maximum”, in relation to a flexi-access drawdown lump sum death benefit paid in respect of a member, means so much of the member’s lump sum and death benefit allowance as is available [F20 on the lump sum being] paid (see section 637S);

• “qualifying person” means a person who is not a non-qualifying person;

• “the relevant two year period” means the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the member’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it.

Textual Amendments

F20 Words in s. 637M(8) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(3)

637N Trivial commutation lump sum death benefits U.K.

A person to whom a trivial commutation lump sum death benefit is paid under a registered pension scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

Allowances U.K.

637P Individual’s lump sum allowance U.K.

An individual’s “lump sum allowance” is £268,275.

637Q Availability of individual’s lump sum allowance U.K.

(1) This section is about the availability of an individual’s lump sum allowance on the occurrence of a relevant benefit crystallisation event (“the current event”).

(2) In this section—

(a) “relevant benefit crystallisation event”, in relation to an individual, means the individual becoming entitled to a relevant lump sum;

(b) “relevant lump sum” means—

(i) a pension commencement lump sum, or

(ii) an uncrystallised funds pension lump sum.

(3) If no relevant benefit crystallisation event has occurred in relation to the individual before the current event, the whole of the individual’s lump sum allowance is available.

(4) Otherwise, the amount of the individual’s lump sum allowance that is available is—

(a) so much of that allowance as is left after deducting the previously-used amount, or

(b) if none is left after deducting that amount, nil.

(5) For this purpose “the previously-used amount” is the aggregate of the non-taxable amounts in relation to each relevant benefit crystallisation event that has occurred in relation to the individual before the current event.

(6) In subsection (5) “non-taxable amount”, in relation to a relevant benefit crystallisation event, means so much (if any) of the relevant lump sum to which the event relates as [F21 is not, by virtue of any provision of this Chapter, taxable pension income] .

(7) A reference in this section to a relevant benefit crystallisation event is to a relevant benefit crystallisation event occurring on or after 6 April 2024.

(8) For transitional provision under which the amount of an individual’s lump sum allowance available on the occurrence of a relevant benefit crystallisation event may be reduced as a result of events occurring before 6 April 2024, see paragraph 125 of Schedule 9 to FA 2024.

Textual Amendments

F21 Words in s. 637Q(6) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(5)

Modifications etc. (not altering text)

C28 S. 637Q applied (with modifications) (for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 20(1A) (as inserted by Finance Act 2024 (c. 3), Sch. 9 paras. 77(3), 124 (with Sch. 9 paras. 125-132)) (as amended (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 8(8)(b), 17)

637R Individual’s lump sum and death benefit allowance U.K.

An individual’s “lump sum and death benefit allowance” is £1,073,100.

Modifications etc. (not altering text)

C29 S. 637R applied (with modifications) (for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 19(2)(2A) (as substituted by Finance Act 2024 (c. 3), Sch. 9 paras. 76(4), 124 (with Sch. 9 paras. 125-132)) (as amended (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

637S Availability of individual’s lump sum and death benefit allowance U.K.

(1) This section is about the availability of an individual’s lump sum and death benefit allowance on the occurrence of a relevant benefit crystallisation event (“the current event”).

(2) In this section—

(a) “relevant benefit crystallisation event”, in relation to an individual, means—

(i) the individual becoming entitled to a relevant lump sum, or

(ii) a person being paid a relevant lump sum death benefit in respect of the individual;

(b) “relevant lump sum” means—

(i) a pension commencement lump sum,

(ii) a serious ill-health lump sum, or

(iii) an uncrystallised funds pension lump sum;

(c) “relevant lump sum death benefit” means any authorised lump sum death benefit other than—

(i) a charity lump sum death benefit, or

(ii) a trivial commutation lump sum death benefit.

(3) If no relevant benefit crystallisation event has occurred in relation to the individual before the current event, the whole of the individual’s lump sum and death benefit allowance is available.

(4) Otherwise, the amount of the individual’s lump sum and death benefit allowance that is available is—

(a) so much of that allowance as is left after deducting the previously-used amount, or

(b) if none is left after deducting that amount, nil.

(5) For this purpose “the previously-used amount” is the aggregate of the non-taxable amounts in relation to each relevant benefit crystallisation event that has occurred in relation to the individual before the current event.

(6) In subsection (5) “non-taxable amount”, in relation to a relevant benefit crystallisation event, means so much (if any) of the relevant lump sum, or relevant lump sum death benefit, to which the event relates as [F22 is not, by virtue of any provision of this Chapter, taxable pension income] .

(7) Where more than one relevant benefit crystallisation event within subsection (2)(a)(i) occurs in relation to an individual on the same day, it is for the individual to decide the order in which they are to be treated as occurring for the purposes of this section.

F23 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) A reference in this section to a relevant benefit crystallisation event is to a relevant benefit crystallisation event occurring on or after 6 April 2024.

(10) For transitional provision under which the amount of an individual’s lump sum and death benefit allowance available on the occurrence of a relevant benefit crystallisation event may be reduced as a result of events occurring before 6 April 2024, see paragraph 126 of Schedule 9 to FA 2024.

(11) For further transitional provision that may affect the operation of this section, see paragraph 20 of Schedule 36 to FA 2004 (pensions in payment before commencement of Part 4 of FA 2004).]

Textual Amendments

F22 Words in s. 637S(6) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(6)(a)

F23 S. 637S(8) omitted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by virtue of The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(6)(b)

Modifications etc. (not altering text)

C30 S. 637S applied (with modifications) (for the tax year 2024-25 and subsequent tax years) by 2004 c. 12, Sch. 36 para. 20(2) (as amended by Finance Act 2024 (c. 3), Sch. 9 paras. 77(4)(a), 124 (with Sch. 9 paras. 125-132)) (as amended (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 8(8)(c), 17)

[F24 637T Section 637S: multiple lump sum death benefits paid U.K.

(1) This section applies where two or more relevant benefit crystallisation events within section 637S(2)(a)(ii) occur in relation to an individual.

(2) The relevant benefit crystallisation events are to be treated for the purposes of section 637S as occurring simultaneously—

(a) immediately before the individual’s death, and

(b) immediately after any pension commencement lump sum to which the individual becomes entitled immediately before death by virtue of section 166(2) of FA 2004 (lump sum rule).

(3) In the application of section 637S for the purpose of determining how much of the individual’s lump sum and death benefit allowance is available on the occurrence of any of the relevant benefit crystallisation events mentioned in subsection (1)—

(a) the reference in subsection (3) of that section to the whole of the individual’s lump sum and death benefit allowance is to the relevant proportion of that allowance, and

(b) the reference in subsection (4) of that section to so much of the individual’s lump sum and death benefit allowance as is left after deducting the previously-used amount is to the relevant proportion of so much of that allowance as is left after deducting that amount.

(4) In subsection (3), “the relevant proportion” means—

where—

• A is the amount of the lump sum death benefit the payment of which constitutes the relevant benefit crystallisation event in question;

• B is the aggregate of the amounts of each lump sum death benefit the payment of which constitutes a relevant benefit crystallisation event mentioned in subsection (1).]

Textual Amendments

F24 S. 637T inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 3(7)