The Lemon Fool

I have a question about the tax treatment of inherited SIPPs.

If a SIPP is inherited, where the original holder of the SIPP was over 75, and the SIPP is partially uncrystalised, is the entitlement to the 25% tax-free lump sum on the uncrystalised portion lost on the death of the original holder? I have made the assumption that it is lost, but cannot find anything that explicitly confirms that assumption.

malkymoo wrote:I have a question about the tax treatment of inherited SIPPs.

If a SIPP is inherited, where the original holder of the SIPP was over 75, and the SIPP is partially uncrystalised, is the entitlement to the 25% tax-free lump sum on the uncrystalised portion lost on the death of the original holder? I have made the assumption that it is lost, but cannot find anything that explicitly confirms that assumption.

I do not know but can the SIPP managers not give you the answer? After all they are the legal owners of the SIPP.

Dod

malkymoo wrote:I have a question about the tax treatment of inherited SIPPs.

If a SIPP is inherited, where the original holder of the SIPP was over 75, and the SIPP is partially uncrystalised, is the entitlement to the 25% tax-free lump sum on the uncrystalised portion lost on the death of the original holder? I have made the assumption that it is lost, but cannot find anything that explicitly confirms that assumption.

The ability to take a 25% PCLS is restricted to the original owner of the SIPP and dies with them.

https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/pension-death-benefits-q-and-a

Q. My client died aged 77 leaving an uncrystallised pension fund of £720,000. Is the widow entitled to 25% of this tax-free, as the client did not take their pension commencement lump sum (PCLS) before death?

A. No. PCLS is a retirement benefit. The full £720,000 represents a death benefit and, as death occurred after age 75, the widow must pay tax at their marginal rate on any payments they receive from this.

ursaminortaur wrote:

malkymoo wrote:I have a question about the tax treatment of inherited SIPPs.

If a SIPP is inherited, where the original holder of the SIPP was over 75, and the SIPP is partially uncrystalised, is the entitlement to the 25% tax-free lump sum on the uncrystalised portion lost on the death of the original holder? I have made the assumption that it is lost, but cannot find anything that explicitly confirms that assumption.

The ability to take a 25% PCLS is restricted to the original owner of the SIPP and dies with them.

https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/pension-death-benefits-q-and-a

Q. My client died aged 77 leaving an uncrystallised pension fund of £720,000. Is the widow entitled to 25% of this tax-free, as the client did not take their pension commencement lump sum (PCLS) before death?

A. No. PCLS is a retirement benefit. The full £720,000 represents a death benefit and, as death occurred after age 75, the widow must pay tax at their marginal rate on any payments they receive from this.

Presumably the Pru/M & G is correct but they are trying to explain why there is no 25% tax free lump sum. Not sure I would be convinced by their reasoning. What we want is a straight forward black and white answer, preferably with a reference to an HMRC manual. The answer though does seem to make sense.

If I were malkymoo I would check with the SIPP manager anyway because they are the ones who should know as they are the ones making the payment.

Dod

Thanks for the replies. I guess the MandG information is correct, but I will check with my SIPP provider as suggested by Dod