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.

I should be getting a call next week from the pension provider with more details and I will ask them because I am very much out of my depth. The person I last spoke to said I could share it as I wished but this advice was obviously wrong.
For those suggesting I will treat it like a lottery win, I won't. It's just nice to spend money mentally and have a little fun.
Dd knows nothing about this money and I see no reason to tell her at this age. I love the idea that when she is older she will have money for things like uni and a house deposit. Things I never had and won't be able to give her.

Her dad did NOT nominate Dd for the lump sum. There is no nominee but I'm the only one who has submitted a claim on DD's behalf. If her siblings put in a claim for the death benefit lump sum will the provider likely share it equally? That is what would be fair.

You posted about this a few weeks ago? You said the ex wife was getting a house and the adult children nothing and you were shocked that your dad could be entitled to his pension?

Your dad is entitled to it as she is a dependent and that's that. It's not up to you to share it or divide it at all. The adult Children had the never of being taken care of finically thought their childhood. Your dad won't have that and the money is hers.

Dd NOT dad

The current rules on pension inheritance are simple.
Died under age 75, no tax to pay, ever, for whoever inherits.
Over 75, tax at marginal rate on any income taken. So theoretically a child or someone with no income could take £12570 ( current personal allowance) in income, tax free per year.

@WitchyBits no? There's no house or ex wife.

Yes, the other kids had the benefit of being supporting throughout childhood and into adulthood but it wouldn't sit right if Dd was the only beneficiary. I know that's not up to me of course. One of the other dc is going to put in claim next week afaik but the other one hasn't and I don't think they plan on doing so. DD's claim is almost at the payout stage I've been told and it might be sorted before her sibs claim goes in if what the company have says is correct.

Put it in savings for your DC it's not yours so don't spend it as if it is. Hopefully the tax situation will not be so bad but I really don't know it sounds fairly unusual inheritance is usually tax free the estate pays any tax due before you get the money.

If a cash lump sum is taken then it will no longer be in the protected ‘wrapper’ of a pension so if for arguments sake it was invested for 10 years then CGT would be payable on any gains. Better to leave it in a pension drawdown account.
This is assuming that it’s a DC pension and not a DB pension with a Death in service payment like civil service/ teachers/ police etc.

Twomanyfrogs- please don’t give advice when you clearly have NO idea what the facts are surrounding pensions 🙄

It's a DB with the lump sum.

Then your DD should possibly also get a 50% dependant’s pension as well as the Death in service payment.
The lump sum is more like a written-in-trust life policy and only the interest above personal savings allowances will be taxed. It’s quite complicated but if she doesn’t have any income then it’s unlikely she would pay any tax unless any interest is above £17570 per year.
If the payment is forthcoming then it’s possible to get £20k in an ISA now and £20k in April. You could put the rest in an NS&I fixed account and feed it into an ISA yearly.

The ONLY stipulation for a DiS benefit to remain Tax free is that it’s paid out within 2 years of death.

I

I'll phone them on Monday and ask lots of questions because I'm confused as hell and I want to make sure I do the right thing.

I'm worrying now that because they've had the claim form for Dd for weeks now and it's almost at the point of payout that the other sibling who is yet to put in a claim is going to miss out if the company decide to award it all to Dd because so far there have been no other claims. I don't want any family fall out. I don't expect there's anything I can do about it but I'm still worrying all the same. The siblings who has yet to put in a claim has known about the pension lump sum for as long as I have but for whatever reason they haven't done anything about it.

You also need to be clear that the money is DDs and not yours if you are on benefits. It may be that you have to hold it in trust for her. I'm not up to date with benefit rules but you should mention this to the pension advisor as it may be necessary to have information for the DWP.

@Poffy it's ok, I've already spoken to the benefits people and have it in writing that DD's money is not classed as mine. The payments from the pension will be labelled as for Dd.

I know this might not sit well with you but you really do need to stop thinking about the other adult children and focus on your own child and prioritise your own child needs above her half siblings. She's a child and needs the financial support to compensate for the lack of a father/child support etc. please, try to remove your personal entanglement and look at this black and white and put your child first.

You also need to contact UC/berries and made sure that you don't risk losing ALL of your benefits by getting the wrong sort of payment into the wrong sort of account. You need to protect yourself and your daughter.

Do not give your daughter's money away. It is not your decision to do this.

Do not spaff it away on a holiday for you and your daughter either. She is 10.

Make sure this money is invested for her to deal with at 18. Get a financial advisor if you do not have one.

When she is an adult she will not thank you for taking her to DisneyWorld of whatever place you have in mind if it is at the expense of potentially buying a property Her father has sensibly made provision for her but your posts alarm me in the way you want to spend it, give it away and refer to thinking about ot as lottery winnings.

Someone needs to ensure your daughter's best interests are being considered.

@WitchyBits I know, it's just not who I am to leave others out. However, they are adults and if they haven't put in a claim then that's their responsibility not mine. I am very focused on Dd but I don't think the other dc should be left out. The other two are mid/late twenties and independent but I don't think k it's right that they should t get anything. It's not my choice to make and it's out of my hands. I just don't like it and Dd wouldn't like it either if she knew. She could choose to share when she's older though.

Maybe their father knows they are likely to have support from their other parents financially whereas you aren't likely to be able to do so hence he has specifically made provision for her. I stand by my other post. This is not your money and not your choice. Do not give her money away.

Why would your other children have a claim when the deceased wasn’t their father?

@Spirallingdownwards perhaps read all
my comments before you cast judgement.

@Parker231 the other siblings are not my children, they are DD's father's children.

I have read all of your posts and all the others too. Simply put it is your daughter's money and not yours. You must not give her money away or spend it. Get a financial advisor and make sure it is invested long-term until she is an adult and she can make her own choices.

If is paid out to you for her then it must be kept safe for her. If the half sibling claims successfully then that will reduce it. I know how you feel - it would be easier if he’d left a will and split it three ways.

@Maray1967 thank you, yes, it would be easier if there was a will and he'd split it three ways. Unfortunately he didn't do anything so we are left to figure it out and do what's best.
I am hoping today will bring some clarity when I make a few phone calls.

I've got a financial advisor calling me tomorrow and I'm on hold to the pension provider to ask a lot of questions.