The LSDBA: the £1,073,100 ceiling that bites on death before 75

The Lump Sum and Death Benefit Allowance caps the total tax-free lump sums payable in respect of a member across lifetime and death combined — £1,073,100 as standard. It is the second of the two post-LTA ceilings, and every PCLS consumes it alongside the LSA. Two events consume the LSDBA alone: serious ill-health lump sums and tax-free death benefits. Both only where the triggering event occurs before age 75.

A worked death-benefit excess

A member dies at 68 with an uncrystallised £1.2m fund, nominated entirely to one adult beneficiary in their personal capacity as a lump sum paid within the statutory two-year window, no protection, nothing previously used.

The excess is taxed as the beneficiary's income at their marginal rate — £126,900 stacked on £30,000 of other gross income takes them to £156,900: it uses the rest of the basic-rate band, the whole higher-rate band and £31,760 at the 45% additional rate, and withdraws their £12,570 personal allowance on the way. Before 6 April 2023 this would have been a flat 55% lifetime allowance charge on the excess. Note the two-stage repeal: the 55% / 25% charges went first, from 6 April 2023 (Finance (No. 2) Act 2023 s.18, with s.19 moving the relevant lump sums to marginal rate — both sections since repealed by FA 2024 s.14(3) as superseded, though their 2023 effect stands), and the allowance itself was abolished a year later, from 6 April 2024 — so a death in 2023/24 already fell outside the 55% charge even though the lifetime allowance still existed. Marginal-rate treatment is usually better, and because it follows the recipient, splitting the lump sum across several beneficiaries or paying it as beneficiary drawdown changes the bill.

PTM172000 · PTM173000 · FA 2024 Sch 9 — figures engine-computed against the 2026/27 config

The 75 boundary

Death at or after 75 takes the death benefit outside the allowance test entirely. An uncrystallised-funds lump sum is pension income for an individual receiving it in a qualifying capacity; a non-qualifying recipient, such as a company or a trustee other than a bare trustee, instead triggers the scheme administrator's 45% special charge (ITEPA 2003 s.637J; PTM073010). Serious ill-health lump sums are allowance-tested before 75 and taxable pension income at or after 75. PCLS and UFPLS, by contrast, keep consuming the allowances at any age. The LSDBA is therefore a pre-75 ceiling. Where a fund may exceed it, the form of benefit (lump sum or beneficiary drawdown) changes the tax outcome.

The common error

Treating “tax-free death benefit before 75” as unconditional. That was close to true under the LTA for modest funds. Under the LSDBA a seven-figure uncrystallised fund paid as a lump sum will breach the ceiling, and prior lifetime crystallisations erode it further — as does pre-2024 history via the transitional rules, where the LSDBA default for pre-75 SIH and death events is 100%, not 25%. Check the position on the LSDBA calculator before assuming the headline.

PTM174200 (transitional LSDBA defaults) · post-75 events: taxable income, no allowance test