Stand-out Q – paying LTA charge…

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FRI, 24 MAR 2017

Our Technical Hub provides access to a wide range of pension tax and trust technical resources. Every now and then we post tweets covering stand out questions from our technical content and our answers in case others might also find them helpful. As Twitter’s character restrictions only allow for the bare bones of the Q&A we link to the details here, too.

Question:

A lifetime allowance charge arises on death of a member. Who pays it?

Answer:

Where a member dies before age 75 and the remaining uncrystallised funds are applied for the payment of death benefits within the 2 year period, there is a test against the deceased member’s remaining lifetime allowance. If the amount crystallised exceeds the remaining lifetime allowance a lifetime allowance charge is due on the excess. Unlike where the liability for the lifetime allowance charge occurs during the member’s lifetime, the liability for the charge falls solely on the recipient(s), dependant or nominee as appropriate.

Therefore the scheme administrator will not take any money from the pension fund to pay any potential lifetime allowance charge. Where the deceased member’s personal representatives identify that a lifetime allowance charge is due, they must report this to HMRC, who then assess the recipient(s) of the death benefit.

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