Death benefits from funds which have not come into payment
In respect of funds that have not yet come into payment, death benefit can be paid either as pensions to dependants or, before the member reaches 75, as a lump sum. Any lump sum will not be taxed but will count as part of the member's lifetime allowance. Otherwise payment may give rise to a 55%. tax liability as a lifetime allowance charge. There will be no test against the lifetime allowance where the death benefits are paid as dependants' pensions.
Secured pensions (in other words an annuity or pension from a defined benefit scheme) may offer value protection where value protection is the repayment on the death of the member before age 75 of the initial capital value of the pension less any pension installments paid before the date of death. All value protection payments will be taxed at 35%.
Pension schemes may instead offer a guarantee that the pension will continue for a period not exceeding 10 years from the date of vesting.