Taxation of insurance proceeds on the death of a member can be fairly complicated and can have adverse tax consequences if not structured properly.

The flowchart below seeks to clarify the tax consequence of the benefit payment which is dependent on the age of a surviving member and whether the payment is made via a Reversionary or Non-Reversionary Pension or lump sum.

 

Flowchart insurance proceeds

 

* Beneficiary in the aforesaid flowchart is assumed to be the surviving spouse.