Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

Less tax in death

26 January 2006 / John Woolley
Issue: 4042 / Categories: Comment & Analysis , Inheritance Tax
JOHN WOOLLEY explains how pension death benefits can be made more tax efficient.

CERTAIN INHERITANCE TAX advantages apply as regards death benefits where an individual is a member of an exempt approved (registered from 6 April 2006) pension scheme. First although the scheme will be held on discretionary trusts no inheritance tax periodic or exit charges will arise because such funds are not regarded as relevant property (IHTA 1984 s 58(1)(d)). Second when death benefits are paid out of the scheme provided that these are distributed within two years of death there will be no inheritance tax (Occupational Pension Scheme Practice Notes para 4.5 and Personal Pension Schemes Guidance Notes para 10.38).
The problem is that once the funds have been released from the pension scheme they are no longer protected but are exposed to the full rigours of inheritance tax. So if as is likely to be the case ...

If you or your firm subscribes to Taxation.co.uk, please click the login box below:

If you are not a subscriber but are a registered user or have a free trial, please enter your details in the following boxes:

Alternatively, you can register free of charge to read a limited amount of subscriber content per month.
Once you have registered, you will receive an email directing you back to read this item in full.

Please reach out to customer services at +44 (0) 330 161 1234 or 'customer.services@lexisnexis.co.uk' for further assistance.

back to top icon