The Lifetime Allowance is the limit on the amount that can be drawn from all pensions in a tax efficient manner. For amounts drawn in excess of this, a tax charge may apply on the excess, known as the Lifetime Allowance Charge.
SIPP members will be able to take their benefits from the age of 55 (the current minimum pension age), or earlier in case of ill health or other specific situations. It is possible to take benefits from the SIPP whilst still in work. The main retirement options available to our SIPP members are:
- Flexi-Access Drawdown
- Buying a Lifetime Annuity or Flexible Annuity
- Buying a Short-term Annuity
- Small Pot Lump Sum
Once members have flexibly accessed their pension savings, contributions to their money purchase arrangements will be subject to the Money Purchase Annual Allowance, with no facility to carry forward unused Allowance from previous tax years.
Retirement options are complex and we recommend members use the information we provide and seek independent financial advice.
Death benefits will be paid out at the discretion of the SIPP Operator and should usually therefore fall outside of the member's Estate for Inheritance Tax purposes.
We can provide information on the SIPP to assist members' discussions with professional advisers, who will then design the solution that provides the member and their dependants with the most tax efficient and appropriate legacy strategy.
Death before Age 75
If a member dies before they are 75, their SIPP fund may be paid out to beneficiaries free of tax. This can be done as a lump or via an income under an annuity or Flexi-Access Drawdown pension (if paid or designated within 2 years - otherwise payments are taxed at the recipient's marginal rate of income tax if paid to an individual or a special 45% tax charge if paid to entities such as trusts or companies).
Amounts above the Lifetime Allowance will be taxed (the Lifetime Allowance Charge) unless the member has taken benefits from that part of their SIPP fund. Certain forms of transitional protection held may reduce or eliminate the Lifetime Allowance Charge.
Death at or after Age 75
If a member is 75 or over when they die, their SIPP fund may be paid out as a lump or via an income under an annuity or Flexi-Access Drawdown pension, but payments are typically taxed at the recipient's marginal rate of income tax if paid to an individual (or a special 45% tax charge if paid to entities such as trusts or companies), regardless of whether the member had taken any benefits from the SIPP. In certain circumstances, lump sum payments to charities will be tax-free.
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