PTM072210 - Death benefits: types of pension: beneficiary's annuity: taxation of ²ú±ð²Ô±ð´Ú¾±³¦¾±²¹°ù²â바카라 사이트™s annuities
As of 6 April 2024 there is no longer lifetime allowance. If you are looking for information about protections, enhancement factors and the lifetime allowance charge please see these pages on .
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Glossary |
Sections 579A, 579D, 646B and 646C Income Tax (Earnings and Pensions) Act 2003
Before 6 April 2015 payments of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuities were taxable as pension income of the recipient. Payment of a ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity or a ²õ³Ü³¦³¦±ð²õ²õ´Ç°ù²õ바카라 사이트™ annuity before 6 April 2015 is not possible, as the definition of a ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ or successor바카라 사이트™s annuity requires the nominee or successor to become entitled to it on or after 6 April 2015.
From 6 April 2015 payments of ²ú±ð²Ô±ð´Ú¾±³¦¾±²¹°ù²â바카라 사이트™s annuity may be taxable, or they may be tax free. The exact rules depend on the type of annuity and when it was purchased.Â
Whatever the type of annuity, or how it was purchased, it is taxable if it is paid in respect of a beneficiary who:
- was aged 75 or older when they died, or
- died before 3 December 2014, at any age.
Where the ²ú±ð²Ô±ð´Ú¾±³¦¾±²¹°ù²â바카라 사이트™s annuity is taxable, it is taxable as pension income. The beneficiary receiving the annuity is liable for income tax on the annuity payments at their marginal rate of tax. The insurance company is required to deduct income tax from the annuity payments, under the PAYE regulations.
Dependants바카라 사이트™ and ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity purchased during the member바카라 사이트™s lifetime
Dependants바카라 사이트™ and ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity purchased after the member바카라 사이트™s death
Dependents바카라 사이트™ and ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity purchased using funds from flexi-access drawdown fund
Dependants바카라 사이트™ annuity purchased using funds from »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund
Successors바카라 사이트™ annuities
Annuity contract purchased before 6 April 2006
Dependants바카라 사이트™ and ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity purchased during the member바카라 사이트™s lifetime
Sections 579A, 579D and 646B(3) Income Tax (Earnings and Pensions) Act 2003
Where the »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ or ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity is a related to the member바카라 사이트™s lifetime annuity (see PTM072200), any payment made on or after 6 April 2015 is taxable if:
- it is paid in respect of a member who was aged 75 or older when they died,
- it is paid in respect of a member who died before 3 December 2014 at any age, or
- an annuity payment was made under the contract before 6 April 2015.Â
If the annuity contract is a replacement for a previous »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ or nominees annuity contract that is related to the member바카라 사이트™s lifetime annuity, the annuity will be taxable if:
- any of the previous »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ or ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity contracts made payments before 6 April 2015,
- the annuity is paid in respect of a member who was aged 75 or older when they died, or
- the annuity is paid in respect of a member who died before 3 December 2014 at any age.
Payments of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ or ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity made on or after 6 April 2015 under a contract that is related to the member바카라 사이트™s lifetime annuity are not taxable if:
- it is paid in respect of a member who died on or after 3 December 2014 aged under 75, and
- no annuity payment was made under the contract before 6 April 2015. If the annuity contract is a replacement for previous »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity contract, the annuity will be tax free only if none of the previous »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity contracts made payments of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity before 6 April 2015.
Dependants바카라 사이트™ and ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity purchased after the member바카라 사이트™s death
Sections 579A, 579D and 646B(1) Income Tax (Earnings and Pensions) Act 2003
If a »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ or ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity contract is purchased after the member바카라 사이트™s death using the member바카라 사이트™s remaining unused drawdown funds or uncrystallised funds, or it is a replacement contract for such a contract, any »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ or ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity payment made on or after 6 April 2015 is taxable if:
- it is paid in respect of a member who was aged 75 or older when they died,
- it is paid in respect of a member who died before 3 December 2014 at any age, or
- an annuity payment was made under the contract before 6 April 2015.Â
If the annuity contract is a replacement for previous contract, the annuity will be taxable if any of the previous바카라 사이트™ annuity contracts made payments of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity before 6 April 2015.
If the sums and assets used to purchase the annuity contract included 바카라 사이트˜unused uncrystallised funds바카라 사이트™, the annuity will also be taxable if the beneficiary did not become entitled to the annuity within two years of the earlier of:
- the day the scheme administrator first knew of the member바카라 사이트™s death, or
- the day they could first reasonably have been expected to know of it.Â
The legislation refers to this period as the 바카라 사이트˜relevant two-year period바카라 사이트™.
If the annuity contract is a replacement for a previous contract purchased using 바카라 사이트˜unused uncrystallised funds바카라 사이트™ any annuity payment will be taxable if the beneficiary did not become entitled to the annuity under the previous contract within the relevant two-year period.
Broadly, 바카라 사이트˜unused uncrystallised funds바카라 사이트™ are funds held under a money purchase arrangement that were uncrystallised immediately before the member바카라 사이트™s death, and since the member바카라 사이트™s death have not been used to provide an authorised pension death benefit (see PTM071000).
Payments of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ or ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity made on or after 6 April 2015 under a contract purchased after the member바카라 사이트™s death will be tax free if:
- it is paid in respect of a member who died on or after 3 December 2014 aged under 75,
- no annuity payment was made under the contract before 6 April 2015. If the annuity contract is a replacement for previous »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity contract, the annuity will be tax free only if none of the previous »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity contracts made payments of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity before 6 April 2015, and
- if the contract was purchased using 바카라 사이트˜unused uncrystallised funds바카라 사이트™ the beneficiary became entitled to the annuity within the relevant two-year period. If the annuity contract is a replacement for previous contract purchased using 바카라 사이트˜unused uncrystallised funds바카라 사이트™, the annuity will be tax free only if the beneficiary became entitled to the annuity under the previous contract within the relevant two-year period.
Dependents바카라 사이트™ and ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity purchased using funds from flexi-access drawdown fund
Sections 579A, 579D and 646C(1), (5) and (6) Income Tax (Earnings and Pensions) Act 2003
A payment of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ or ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity under a contract purchased using funds from the dependant바카라 사이트™s or nominee바카라 사이트™s (as appropriate) flexi-access drawdown fund is taxable if:
- it is paid in respect of a member who was aged 75 or older when they died, or
- it is paid in respect of a member who died before 3 December 2014 at any age.
Payments of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ or ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity under a contract purchased using funds from the dependant바카라 사이트™s or nominee바카라 사이트™s (as appropriate) flexi-access drawdown fund are taxable if:
- any of the funds designated to create that flexi-access drawdown fund included the member바카라 사이트™s 바카라 사이트˜unused uncrystallised funds바카라 사이트™ (see PTM072430), and
- those unused uncrystallised funds were not designated within two years of the earlier of the day the scheme administrator first knew of the member바카라 사이트™s death, or the day they could first reasonably have been expected to know of it (the relevant two-year period).
A payment of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity under a contract purchased using funds from the dependant바카라 사이트™s flexi-access drawdown fund is also taxable if:
- any sums and assets in that flexi-access fund derive from a »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund, and
- before 6 April 2015 »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ income withdrawal was paid from the »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund or payments of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ short -term annuity or »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity were made before 6 April 2015 where that annuity was purchased using funds from the »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund.
Funds under a »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ flexi-access drawdown fund will derive from a »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund if:
- immediately before 6 April 2015 the dependant was in flexible drawdown and so converted to flexi-access on 6 April 2015 바카라 사이트“ see PTM072440, or
- on or after 6 April 2015 the dependant converted to flexi-access as described at PTM072450.
A payment of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity under a contract purchased using funds from the dependant바카라 사이트™s flexi-access drawdown fund is tax free if:
- it is paid in respect of a member who died on or after 3 December 2014 aged under 75, and
- any of the funds designated to create that flexi-access drawdown fund included the member바카라 사이트™s 바카라 사이트˜unused uncrystallised funds바카라 사이트™ (see PTM072430) the funds were designated within the relevant two-year period (see above), and
- any sums and assets in that flexi-access fund derive from a »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund, and no payments have been made that would make the annuity taxable (see above).
A payment of ²Ô´Ç³¾¾±²Ô±ð±ð²õ바카라 사이트™ annuity under a contract purchased using funds from the nominee바카라 사이트™s flexi-access drawdown fund is tax free if:
- any of the funds designated to create that flexi-access drawdown fund included the member바카라 사이트™s 바카라 사이트˜unused uncrystallised funds바카라 사이트™ (see PTM072430) the funds were designated within the relevant two-year period (see above), and
- it is paid in respect of a member who died on or after 3 December 2014 aged under 75.
Dependants바카라 사이트™ annuity purchased using funds from »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund
Sections 579A, 579D and 646C(1) and (4) Income Tax (Earnings and Pensions) Act 2003
A payment of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity under a contract purchased using funds from the »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund is taxable if:
- it is paid in respect of a member who was aged 75 or older when they died, or
- it is paid in respect of a member who died before 3 December 2014 at any age.
A payment of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity under a contract purchased using funds from the »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund is also taxable if before 6 April 2015 any of the following payments were made:
- Dependants바카라 사이트™ income withdrawal from the dependant바카라 사이트™s drawdown pension fund
- Dependants바카라 사이트™ short-term annuity or dependant바카라 사이트™s annuity made under any contract purchased using funds from the dependant바카라 사이트™s drawdown pension fund.
A payment of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity under a contract purchased using funds from the »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund is tax free if:
- it is paid in respect of a member who died on or after 3 December 2014 aged under 75,
- before 6 April 2015 no payment of »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ income withdrawal was made from the »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown fund pension fund, and
- before 6 April 2015 no payments of annuity were made under any »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ short-term annuity or »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ annuity contract purchased with sums and assets from the »å±ð±è±ð²Ô»å²¹²Ô³Ù²õ바카라 사이트™ drawdown pension fund.
Successors바카라 사이트™ annuities
Sections 579A, 579D, 646B(2) and 646C(2) Income Tax (Earnings and Pensions) Act 2003
Payments of a ²õ³Ü³¦³¦±ð²õ²õ´Ç°ù²õ바카라 사이트™ annuity paid in respect of a beneficiary who died on or after 3 December 2014 aged under 75 are not taxable.
A ²õ³Ü³¦³¦±ð²õ²õ´Ç°ù²õ바카라 사이트™ annuity paid in respect of a beneficiary who died:
- aged 75 or older, or
- before 3 December 2014 at any age
is taxable.
Annuity contract purchased before 6 April 2006
Part 9 Income Tax (Earnings and Pensions) Act 2003
Paragraph 45A Schedule 36 Finance Act 2004
Article 2(3) The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572
A contract purchased before 6 April 2006 to provide a pre 6-April 2006 dependant with an annuity following the death of a pension scheme member may pay a tax- free annuity if all the following conditions are met:
- The annuity purchase conditions
- The annuity contract term conditions
- The annuity payment conditions.
If these conditions are not satisfied the annuity is taxable as pension income of the recipient. Â
Annuity purchase conditions
The annuity was purchased before 6 April 2006 by a 바카라 사이트˜tax approved바카라 사이트™ pension scheme that could automatically become a registered pension scheme on 6 April 2006 (see PTM031300).
The annuity was purchased to provide or secure benefits payable under that pension scheme.
The annuity was purchased from an insurance company together with an annuity payable for the life of the member of the pension scheme.
The pre 6-April 2006 dependant바카라 사이트™s annuity is purchased together with the member바카라 사이트™s life annuity if the contract is:
- a 바카라 사이트˜joint life바카라 사이트™ annuity; that is a single contract providing an annuity for the life of the member and then an annuity to the pre 6-April 2006 dependant following the member바카라 사이트™s death, or
- a separate contract purchased within seven days before or after the purchase of the contract annuity providing the annuity for the life of the member.
Annuity contract terms conditions
The terms of the annuity, or any agreement or arrangement made in connection with the annuity, do not allow a payment that if it had been made before 6 April 2006 would have given HMRC grounds to withdraw the tax approval of the pension scheme.
The terms of the contract have not been altered on or after 6 April 2006 to allow for a payment that if it was made by a registered pension scheme would be an unauthorised payment.
Annuity payment conditions
The annuity is payable in respect of and following the death of the pension scheme member.
That pension scheme member died on or after 3 December 2014 aged under 75.
No annuity was paid to the pre 6 April 2006 dependant before 6 April 2015.
At all times on or after 6 April 2006 both the annuity payable to the pension scheme member and the annuity payable to the pre 6 April 2006 dependant satisfied the annuity contract terms conditions.