IHTM17041 - Pensions: IHT charges: introduction
Inheritance Tax charges arise in these general situations that are described in more detail in the following sections. Except where specific legislation applies, the charges arise under general principles and apply to all types of pension scheme.
Lifetime transfers
Charges arise under IHTA84/S3(1)where there is a disposition in lifetime that is a transfer of value. This can include contributions (IHTM17042), transfers (IHTM17072) or other changes to pension scheme rights that result in a decrease to a person’s estate. Generally, there is only a loss to the estate if the transferor is in ill-health at the date of the event.
Benefits within the estate
Pension scheme benefits that are paid to an estate or a deceased’s personal representatives as of right fall within the estate under IHTA84/S5(1). This may include continuing guaranteed payments (IHTM17054) and certain death benefits (IHTM17051).
General power over benefits
Pension scheme benefits that are paid in accordance with a binding instruction by a person fall within that person’s estate in accordance with IHTA1984/S5(2) (IHTM17051). This applies primarily to death benefits paid to nominated beneficiaries where the scheme provider has no discretion over the payments.
Relevant property
A trust-based pension scheme that is not:
- a registered pension scheme (IHTM17021),
- a qualifying non-UK pension scheme (IHTM17025) or
- a section 615(3) scheme (IHTM17026)
will be a relevant property trust.
Many of these schemes are employer-financed retirement benefit schemes (EFRBS) (IHTM17027). In addition to the relevant property charges on the scheme itself, payments made from these schemes may be chargeable under the general principles above as for any other pension scheme.
Omission to exercise a right
Charges can arise under IHTA84/S3(3) where a person omits to exercise a right to take pension benefits and so increases the death benefits payable outside their estate. This applies primarily for deaths before 6 April 2011. Where the death is on or after 6 April 2011 and where a member of
- a registered pension scheme (IHTM17021),
- a qualifying non-UK pension scheme (IHTM17025) or
- a section 615(3) scheme (IHTM17026)
omits to exercise a right, IHTA84/S3(3) will not apply. But, it can still apply to other pension schemes. The guidance starting at IHTM17400 is still relevant for these cases.
Alternatively secured pensions
For deaths between 6 April 2006 and 5 April 2011 there were some specific charges relating to alternatively secured pensions and pension funds for people over age 75 (IHTM17350) which were contained in IHTA84/S151A to IHTA84/S151E. These charges ceased to apply for deaths on or after 6 April 2011.