Income Tax (Earnings and Pensions) Act 2003 section 637N

Trivial commutation lump sum death benefits

Section 637N establishes how trivial commutation lump sum death benefits paid from registered pension schemes are treated for income tax purposes.

• A trivial commutation lump sum death benefit is a payment made from a registered pension scheme following someone's death, where the remaining pension entitlement is small enough to be paid out as a single lump sum.
• The full amount of the lump sum is treated as taxable pension income of the person who receives it.
• The tax charge arises in the tax year in which the payment is actually made.
• This provision was introduced by the Finance Act 2024 as part of a wider set of reforms to pension taxation rules.