Dependant’s Drawdown in SIPP

[morestout]

Following the death of my wife, her SIPP was amalgamated into mine. I am advised that I can withdraw the current value of her former SIPP free of tax but will I have to declare this amount on my tax return for 23/24 and pay tax on it.

[ursaminortaur]

Following the death of my wife, her SIPP was amalgamated into mine. I am advised that I can withdraw the current value of her former SIPP free of tax but will I have to declare this amount on my tax return for 23/24 and pay tax on it.

Interesting. It's not something I'd looked into but I'd assumed that an inherited SIPP was kept separate from the beneficiary's own pension pot rather than being merged. Such inherited Sipps were supposed to not count against the beneficiary's LTA limit (something which obviously won't matter at all from next April when that limit is fully abolished) and were supposed to be inheritable themselves.

If your wife died before age 75 then withdrawals from the inherited SIPP are meant to be tax free so I wouldn't have thought that they needed mentioning on a tax return and no tax should need to be paid. If on the other hand she died after age 75 then withdrawals from the inherited SIPP should be taxed at your marginal rate.

I'd also assumed that any growth in that inherited SIPP before you withdrew it would be subject to the above conditions so that if she had died before age 75 then all the money in the inherited SIPP pot could be withdrawn tax free even if you withdrew it slowly over say ten years and there had been a fair amount of growth during that period - which again is why I would have expected the inherited pot to have been kept separate.

[BullDog]

Following the death of my wife, her SIPP was amalgamated into mine. I am advised that I can withdraw the current value of her former SIPP free of tax but will I have to declare this amount on my tax return for 23/24 and pay tax on it.

I have a relative in the exact same situation. Below is a link to HMRC's page explaining the tax treatment of various pension types. In my relative's case it was a defined contribution pot already in drawdown, the deceased was under 75. The pension pot is inherited tax free and so does not have to be delcared on a tax return. Link -

https://www.gov.uk/tax-on-pension-death-benefits