A common feature of many pension schemes is that from a
specified age depending on the type of scheme the policyholder can
elect to take the retirement benefits. Where the policyholder does
not elect to take the retirement benefits (
IHTM17030) at the specified age and has
still not done so when they die (so that the death benefits (
IHTM17030) become payable) a lifetime
transfer under IHTA84/S3 (3) can arise on the failure to exercise
the right to take the retirement benefits.
In February 1992, after discussion with the ABI, we issued a
Tax Bulletin (
IHTM17092) clarifying the circumstances
in which a claim might arise.
Where the member has reached pension age and decided not to
take their retirement benefits this is an example of a
‘change of benefits’ which the parties should report in
answering question 16 on the form IHT409 (
IHTM10035) if done within 2 years of
the deceased's death. You should refer any file where the form
IHT409 has been completed this way to TG in IHT Edinburgh. The
pension specialist in TG will consider whether a claim for IHT
under IHTA84/S 3 (3) arises in line with the Tax Bulletin.
Concessions in the Tax Bulletin (where the death benefits
are paid to the member’s spouse or civil partner (
IHTM11032) and/or financial dependants)
are restricted to claims arising under S3 (3) on the
deceased’s omission to exercise their right to take their
retirement benefits. In certain situations the trigger for a
IHTA84/S3 (3) claim might also give rise to a IHTA84/S3 (1) claim
in its own right (for example, where a member assigns (
IHTM17071) their death benefits whilst
in ill health and defers taking their retirement benefits). The
concessions may cover the IHTA84/S3 (3) claim but do not apply to
the claim arising under IHTA84/S3 (1).
