In cases where a person contributes to their own pension
scheme and the death benefits (
IHTM17030) have been transferred
outside their own estate but the retirement benefits (
IHTM17030) are retained, the
contributions may be transfers of value (
IHTM04024). Whether there have been
transfers of value depends on the health of the member of the
scheme at the time they made the contributions. However, generally
speaking, where contributions are made more than 2 years before the
death you can assume (unless there is clear evidence to the
contrary) that the member was in normal health at the time so there
is no transfer of value.
Where contributions have been made to a pension scheme
(approved or unapproved) within 2 years of the death the matter
should be referred to the Pension Specialist in TG at IHT
Edinburgh. Under no circumstances should you raise the possibility
of a claim for IHT with the taxpayer and/or get involved in a
discussion on normal out of income (
IHTM14231) exemption before TG have had
chance to consider the case.
The IHT position with regard to whether there have been
transfers of value is as follows
A contribution (or payment of a premium) whether direct or indirect (for example, by a reduction in the remuneration which they would otherwise have been paid) by a member to a pension scheme should not be treated as a transfer of value. This applies even where the death benefits are written in trust and not for the member's own benefit. The reason is that, provided the member is in good health at the time and so likely to survive to eventually take their retirement benefits (when the death benefits will lapse), then the contribution is providing a benefit for the member and so there is no loss to their estate.
If the member is in ill health when the contribution is made (so that they are unlikely to survive to take their retirement benefits) then, if the death benefits have been assigned out of their own estate, there is likely to be a transfer of value.
