IHTM17058 - Pensions: IHT charges: Crown, local authorities and overseas governments
Death in service benefits payable in respect of service under the Crown, local authorities or overseas governments are generally (but not always) payable at the discretion of the pension provider (IHTM17051), so they are not liable to Inheritance Tax.
The following guidance is only general and will not cover every situation. Scheme rules may change and you should check the latest position or ask for advice from Technical.
Civil Servants
A repayment on death of contributions by civil servants who were neither married nor in a civil partnership in respect of widow’s or surviving civil partner’s pension are included in the estate.
Death benefits payable on the death of a serving civil servant are not included in the estate.
H M Judges
Where benefits are payable under the Judicial Pensions and Retirement Act 1993 they are included in the estate, unless a valid irrevocable nomination was in force at the death.
The ‘New Judicial Pension Scheme’ (‘NJPS’) was established under the Judicial Pensions Regulations 2015. Death benefits payable under the NJPS are included in the estate.
The Judicial Pension Scheme 2022 (‘JPS 2022’) was established under the Judicial Pensions Regulations 2022 with effect from 1 April 2022. Death benefits under JPS 2022 are included in the estate.
Overseas Service
Sums payable on death to personal representatives by way of return of subscriptions under the regulations of:
- the Indian Military Widows and Orphans Fund;
- the Superior Services (India) Family Pension Fund
- the Indian Military Service Family Pensions Fund; and
- the Indian Civil Service family pension fund
Are not included as part of the estate (IHTA84/S153 (1)).
A lump sum payable on death to personal representatives under a scheme constituted under the Pensions (India, Pakistan and Burma) Act 1955 or a corresponding scheme ( a foreign asset by virtue of S153 (2)(a) is part of the estate if the deceased died domiciled (IHTM13000) in the UK. It is excluded property under IHTA84/S6 (1) if the deceased was domiciled outside the UK.
Benefits payable to personal representatives as of right on death of a Colonial Government servant (a foreign asset under S153 (2)(b) are part of the estate if the deceased died domiciled in the UK). They are excluded property under IHTA84/S6 (1) if the deceased was domiciled outside the UK.
Benefits payable under s.1 Overseas Pensions Act 1973 other than ‘statutory increases’ thereof (a foreign asset by virtue of S153 (4) and S153 (2)(b)) are part of the estate if the deceased died domiciled in the UK. They are excluded property under IHTA84/S6 (1) if the deceased was domiciled outside the UK.
Benefits payable out of the Central African Pension Fund (a foreign asset by virtue of S153 (2)(c)) are part of the estate if the deceased died domiciled in the UK. They are excluded property under IHTA84/S6 (1) if the deceased was domiciled outside the UK.
Lump sum payable on death to personal representatives as of right under a scheme constituted under the Overseas service Act 1958, or a corresponding scheme (a foreign asset by virtue of S153 (2)(d)) are part of the estate if the deceased died domiciled in the UK. They are excluded property under IHTA84/S6 (1) if the deceased was domiciled outside the UK.
Teachers
Lump sum death benefits (death grants) paid by the English or Scottish Teachers’ Pension Schemes are discretionary and are not part of the estate.
Payments under the Northern Ireland Teachers’ Pension Scheme are not discretionary and are part of the estate and subject to Inheritance Tax.
Any part of the lump sum attributable to additional voluntary contributions paid under the Teachers (AVC) Regulations 1989 if the deceased did not leave a widow, widower or surviving civil partner are part of the estate.
Local Government
The death grant is discretionary and under the regulations the administering authority may make payments. These are not part of the estate.
National Health Service
In general, lump sum death benefits are part of the estate unless spouse or civil partner exempt, but see IHTM17059 for payments relating to NHS and Social Care Coronavirus Life Assurance.
Before 1 April 2000
1995 Section
Under the 1995 Regulations any death benefit was payable to a surviving spouse and would be exempt. If there was no surviving spouse or the member had given a notice that the surviving spouse was not to receive payment then the death benefit was payable to the member’s personal representatives as of right. In that case, it is part of the estate.
After 1 April 2000 but before 1 April 2008
1995 Section
Under the 2000 Regulations the default position is that any death benefit is payable to the member’s personal representatives. The member can also make and revoke a binding nomination. In both these cases the lump sum is part of the estate. The lump sum may be paid to a surviving spouse and, from 5 December 2005, a surviving civil partner and is then exempt.
After 1 April 2008
1995 Section
Under the 2008 Regulations, which amended the 1995 Regulations, a lump sum is firstly payable to a surviving partner and is exempt. The member can also make and revoke a binding nomination (taxable). If there is no surviving partner or binding nomination, the lump sum is payable to the estate and is taxable. The definition of ‘partner’ used here is the deceased’s surviving spouse or civil partner or their ‘nominated partner’.
2008 Section
Under the 2008 regulations a lump sum death benefit is payable to the member’s personal representatives unless there is a binding nomination in favour of other persons or a surviving adult dependant. It is part of the estate and taxable unless spouse or civil partner exempt.
2015 Regulations
Under the 2015 regulations a lump sum death benefit is payable to the member’s personal representatives unless there is a binding nomination in favour of other persons or a surviving adult dependant. It is part of the estate and taxable unless spouse or civil partner exempt.