Tax on lump sum

[LumpSums]

My young Dd is set to inherit her dad's pension lump sum. She is 10. I don't know how much it is yet but perhaps around £100,000. Would tax be payable on this? The website says tax of 40% but as she is a child does that still apply? If so is it up to me to arrange for that tax to be paid or does the pension service take it off before payment like happens with wages?
TIA.

We weren't together at the time of his death and were never married.

ah apologies, I didnt see the first IF in your post, it looked like you were telling the OP it would be taxable. I guess that makes me the nincompoop 🤐

fwiw i think it is almost certainly not taxable but from the info given cant say for sure.
I've already given the OP the most helpful link

@GwenPost thank you. Like you I think it won’t be taxable.

For those that think 10 year olds don’t pay tax. They can and do. Think Daniel Ratcliffe who would have earns £££ as a child, unless there was a legal tax avoidance scheme in place, he would have paid tax on his income.

If my Dd gets all of the pension lump sum and her siblings (to other mothers) get none, could I choose to share this with her siblings?

No she would need a deed of variance for this. I would also say this inheritance is hers so it would be best to go in an account for her benefit only.

No! It isn’t yours and neither would you be able to persuade her

Sorry feed of variation. I have flu right now and my brain is mushy.

No. It isn’t your money to give away.

I’d really encourage you to take some professional advice on the status of this money, whether to leave it inside a pension, and if not what else to do with it. It’s a life-changing sum and, to the extent you have control of it, you may well be acting as trustee which means you have legal duties in respect of it.

Just as a point of note.
If you chose to put this into a beneficiary’s drawdown pension for your DD. All interest and growth within the pension would be free of tax and withdrawals would be free of tax. She would not need to wait until pension age to take withdrawals.

Take professional advice!

Is the father to the siblings the one who left the pension? If they were financially dependent on him, the trustees have a duty to take this into account!

Where can I go to get professional advice on this please? There are other children to consider here and it wouldn't be fair for Dd to get it all and her siblings be left out in the cold because their father didn't make any provision for them. The siblings are close and Dd would want things to be equal.
It might be paid into DD's account which is ultimately in my name or it may be paid directly into mine for her.
It feels like a lot of responsibility to make sure I get this right.

@messybutfun yes but only my Dd is/was financially dependent on him. The others are over 18 and independent adults.

Please do not give out such info. Pensions are written under trust - well most of them anyway - it does not matter what the will says. There can be an expression of wishes on what the policyholder wants to happen to the fund, however, see my previous post, the trustees have a duty to all financial dependents.

Oh, here's no will. He died intestate.

If this lump sum is paid into my account for Dd, what am I supposed to do with it??

Try not being patronising.

I have no advice if you bothered to read my post. I actually said that a the OP can not just decide to share her dd’s inheritance and there is a process in place for this which is the deed of variation. No advice on whether it’s appropriate in this situation.

What does your financial advisor advise? It is nothing like thinking you've won the lottery.

@Carnationstreet7 I don't have a financial advisor. I've just been told Dd is getting a lump sum but not her siblings and I'm totally lost with what I need to do.

Just stop spouting nonsense and read what I’ve said. A deed of variation refers to a will. Pensions are not governed by wills, they are trusts!

Ok, so how will this inheritance work? What do I need to do? I haven't got any money for a financial advisor. I'm on benefits and have nothing left at the end of the month.

I just want to put this out there that there has been a mum go to jail for spending her daughters inheritance so please do bare that in mind.

www.bbc.co.uk/news/articles/cerr4nlkwvdo.amp

I'm not saying you have any ill intent, but I personally would leave her inheritance alone and get financial advice on where is best to keep it. No holidays or sharing it around, just leave it be. I would also probably consider making it inaccessible until she is 21 or better yet 25 as most 18 year olds are reckless with money!

Who contacted you? Speak to the provider and ask them about options, particularly beneficiary drawdown, this will kepp the funds in a tax efficient wrapper and money can be withdrawn tax free at any time.
This does not apply to DB pensions.

OP, given you are feeling a bit out of your depth, I would suggest your first port of call should be a local solicitor who deals with trusts etc (anyone who does wills should be able to help). It's really important that you understand that this is your daughter's money not yours and that if you are going to be trustee of the money you have legal obligations to act in your daughter's best interests. This means you cannot give it away and you need to be prudent in how you deal with it and not approach it like a lottery win You could even talk to the solicitor about them acting as trustee instead of you- they charge a fee for this but this could come out of the trust so you wouldn't need to pay it and that would mean you didn't have to worry and the money would be safe for your daughter when she grows up.

In terms of fairness, it is kind of you to think of his other children. But they are adults and your daughter is a dependent minor. When the pension scheme pays out, they take account of the wishes of the deceased (who has nominated his DD to get the money) but they can override them if they think it's appropriate. In this situation, they would be incredibly unlikely to override them as your DD is her father's only dependent and so clearly the right person to receive the money. So please don't worry about that aspect.

You need to seek legal advice, especially with you being on benefits. You don't want it to be taken as savings for yourself. Could it possibly go into trust? Your DD can always choose to share with her siblings when she's an adult

OP, pensions are treated differently to assets after death if a will is not present.

It will depend on the type of pension your ex had (defined benefit or defined contribution) but usually the pension holder has to decide who the beneficiaries of their pension are. If your ex decided that was all his children, then the pension pot should be distributed accordingly. If he decided it was all for your DD, that is who it will go to.

I would speak to whom ever contacted you in the first place for more information.