The lifetime transfer claims which can arise as a consequence
of income drawdown (
IHTM17101) are
IHT acknowledge that this will normally be for commercial and retirement planning reasons (what is described as a ‘genuine pension arrangement’ in the Tax Bulletin ( IHTM17092)). If however the member is in ill health when they opt for income drawdown then a claim under IHTA84/S3 (3) may arise. They are unlikely to survive to take their full retirement benefits ( IHTM17030) and as a result the balance of the pension fund will be paid outside their estate.
If the member survives for a period of more than 2 years from the inception of income drawdown it is assumed in the absence of evidence to the contrary that they were in normal health at the time. Ill health in this context is the same as in the Tax Bulletin - terminally ill or such poor health that the member’s life is uninsurable.
Where ill health intervenes and the member reduces their level of income drawdown this may trigger a IHTA84/S3 (3) claim. The reducing of the level of income taken has the effect of increasing the value of the pension fund paid to others on the death and is not a ‘genuine pension arrangement’ for the member himself.
Any case where any of these claims appears to be in point should
be referred to TG at CT Edinburgh. The claims will be investigated
by the pension specialist in TG in conjunction with the BAO.
The Tax Bulletin concessions will apply where appropriate
(for example, where payment is made to a spouse, civil partner (
IHTM11032) or financial dependent).
