Death Benefits and Taxes

Bank Transactions - Death

When entering a new bank transaction, there are 2 expenditure options that cover the lump sums that can be paid on death by a SSAS or SIPP:

1. DIS Lump Sum – for a lump sum paid from uncrystallised funds (death in ‘service’)

2. Ddn Death LS – for a lump sum paid from crystallised funds (death in drawdown).

The DIS lump sum should be the amount paid to each beneficiary. Any lifetime allowance charge should be entered separately.

The Ddn Death LS should be the amount paid net of tax to the beneficiaries. The tax payment should be entered separately.

There is a box to select the member when entering the new bank transactions. This is the deceased member whose fund will pay the amount and not the beneficiary.

Bank Transactions – Benefit Taxes

There are 2 expenditure options for taxes relating directly to benefits:

1. LTA Charge – for the lifetime allowance tax charge when a BCE causes the lifetime allowance to be exceeded.

2. Ddn Death Tax – for the tax paid following a lump sum paid from crystallised funds.

PAYE payments are not a liability of the scheme but part of the member’s pension. They should be entered as pension payments and then shown as Tax in the Benefit Payments grid (on the ‘Members, Pensions’ screen)

The general option of ‘Tax’ should just be used for any tax suffered on investments or other incidentals.

Importing

Once the bank transactions have been posted they can be imported from the ‘Benefit Payments’ tab on the Benefits screen (under ‘Members, Pensions’). The description for the payment in that screen will be the same as the bank transaction description.

The DIS lump sum will be paid from unvested funds and so no amounts should be entered in any pre 2006 or TiD arrangement columns.

The drawdown amounts (Ddn Death LS and Ddn Death Tax) will be paid from all of the vested arrangements and so the amount relating to each pre 2006 or TiD arrangement should be entered.

If a member takes retirement benefits that exceed the lifetime allowance, the full amount of the BCEs will move from the unvested to the vested subfund. The LTA Charge will later be paid from the scheme and so will be deducted from the vested subfund.

If a member dies with uncrystallised funds then any LTA charge comes from uncrystallised funds.

The Protected Rights element of either type of lump sum payment should be entered in the ‘Prot Rights’ column.

Fund Split

The death benefits and taxes will be taken into account in the fund split, reducing each arrangement as appropriate.

For each ‘LTA Charge’ payment, the fund split calculation will ask you whether the payment relates to a death benefit paid from uncrystallised funds (in which case the LTA charge is deducted from uncrystallised funds) or whether it relates to a retirement benefit (in which case it will be deducted from the normal crystallised fund because the whole amount of the BCE was transferred to the that fund). However, if this does not follow the pattern of the data that you have entered, you can enter an internal transfer to resolve the fund split. This will be necessary if part of the LTA charge relates to protected rights.