SIPP death benefits

When you die any money that is left in your SIPP can be passed on to your loved ones. Ideally, you should have told your provider who you want your beneficiaries to be with an expression of wishes form.

This money will fall outside of your estate and be paid free of inheritance tax, whatever age you die. However, whether or not it will be subject to income tax depends on when you die.

SIPP death benefits if you die before age 75

As a general rule, if you die before your 75th birthday and the funds are designated within two years of  your death, your pension pot will be passed on to your beneficiaries tax-free when taken out as income. If it is taken as a lump sum, it will be tax-free subject to your remaining Lump Sum and Death Benefit Allowance (LSDBA). Any lump sum death benefits paid from funds that were crystallised before 6 April 2024 will not be tested against the LSDBA, since they will have already been tested against the old Lifetime Allowance (LTA).

The balance over your remaining allowance will be taxed at your beneficiary's marginal rate of income tax. 

SIPP death benefits if you die after your 75th birthday

If you die after your 75th birthday, your beneficiaries will have to pay tax on that money. This will be charged at their marginal rate of income tax. 

If you have requested that your SIPP should be paid into a trust when you die (rather than being paid to one or more individuals) the money will be paid as a lump sum and taxed at a rate of 45%. 

You might also have decided to leave your SIPP to a charity. If you die after age 75, this won’t be taxed. However, you need to have nominated which charity the money should go to and have no dependents. 

Learn more: SIPP inheritance tax.