Category: Group life · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed 2026-06-10
A lump sum death benefit (LSDB) is a single cash sum payable on the death of a member of a pension scheme or group life arrangement. From 6 April 2024 the Finance Act 2024 introduced the lump sum and death benefit allowance (LSDBA) of £1,073,100, against which lump sum death benefits from registered pension schemes (including registered group life schemes) are tested.
Category: Group life Also known as: LSDB, death benefit lump sum Allowance from 6 April 2024: £1,073,100 LSDBA Related concepts: Group life insurance lump sum, Registered group life policy, Tax treatment group life
The LSDB is the legal term used in the registered pension regime for any lump sum paid on a member’s death. It includes group life lump sums from registered group life schemes, lump sum death benefits from defined contribution and defined benefit occupational schemes, and lump sums from personal pensions on death before age 75.
LSDB is defined and regulated under Part 4 of the Finance Act 2004 as amended by the Finance Act 2024, which replaced the lifetime allowance with the lump sum allowance (LSA, £268,275) and the lump sum and death benefit allowance (LSDBA, £1,073,100). LSDBs in excess of the deceased’s available LSDBA are taxable on the recipient at their marginal rate of income tax. Lump sums from excepted group life policies do not count against the LSDBA because they are outside the registered pension regime.
The LSDBA applies cumulatively across all of the deceased’s registered pension scheme LSDB payments. Trustees of registered schemes have a duty to identify and report LSDB payments via the Accounting for Tax (AFT) Return and to apply income tax where the recipient’s marginal rate so requires.
A senior partner with £900,000 of accrued defined contribution pension dies before age 75. The DC fund is paid as a lump sum to the spouse. The deceased also has a registered group life lump sum of £400,000. Total LSDB = £1,300,000; LSDBA available is £1,073,100; the excess £226,900 is taxable on the spouse at her marginal rate. By contrast, if the £400,000 group life cover had been provided via an excepted group life policy, no LSDBA test would arise.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
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