Revenue & Customs reserves the right to subject a pension fund to an IHT charge if it feels it has been used for tax avoidance purposes. From 6 April 2011, the failure of the member to exercise their right to draw benefits at his/her nominated retirement age will no longer result in an IHT charge, although a transfer within two years of death where the member was in Ill health could still cause the fund to fall within the estate on death.
Expressions of wishes
A scheme member’s request to pay benefits to named beneficiaries on his death is not legally binding on the scheme trustees – and there can be IHT implications where this is not the case. The member can submit an expression of wishes form to the trustees nominating the beneficiaries who he would like to receive any benefits available on his death.
With the changes to the death benefit options it is essential that expression of wish forms are reviewed frequently and new forms are completed on the death of a member, dependant, nominee or successor to ensure there is always a valid form on file. In the event of death occurring with no valid expression in place, scheme administrators will be required to look for any dependants, although it is still possible to pay a lump sum to anyone should the dependants not need or want the funds, just not a flexi-access drawdown.
Claire Trott is head of pensions technical of Ssas and Sipp provider Talbot and Muir
Key points
On 30 September 2014 the major overhaul of the death benefits for money purchase pensions was announced.
Capped/flexi-access drawdown or uncrystallised funds is where the freedoms have had the most impact.
Pension death benefits will not normally be subject to inheritance tax regardless of the age of the scheme member at death.
This article was amended on 29 June
