13th March 2017
Prudential: Calculation of IHT in relation to pensions and Staveley
Clare Moffat, Senior Technical Manager at Prudential, considers the impact of IHT on pension death benefits and also the potential impact of the Staveley case.
The rise in DB transfers and indeed the general trend to transfer from any scheme which has more limited death benefits to a more flexible scheme, means that the impact of IHT on death benefits is a hot topic. A common question that is asked by advisers calling our technical helpline is how any IHT would be calculated. In addition, the recent decision in the Staveley case was published on 10 January 2017. Has this had an impact on IHT and pensions?
Death benefits do not usually form part of the estate which means that IHT is not ‘normally’ payable. However, in certain scenarios IHT will be payable. We discussed how inheritance tax and pensions interact in last summer’s Oracle quarterly and the facts and planning are also considered in detail in our Oracle technical centre. Essentially, there are 3 times when a death benefit from a pension scheme could attract IHT; if the payment forms part of the estate, lifetime transfers and if there is a general power to dispose.
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