A member of a pension scheme has what is known as a
‘statutory right’ to transfer their pension fund from
their current scheme to a new one. When a person transfers their
fund they surrender their rights under the first scheme in return
for rights under the second. A person can do this even though they
may have given an irrevocable direction as to the payment of the
death benefits (
IHTM17030) under the first scheme (even
where under the first scheme they had irrevocably assigned the
death benefits on discretionary trusts). That direction would not
apply to payment of the equivalent benefit under the second scheme.
The member can therefore transfer to a second scheme and
direct that the death benefit should be paid to anyone that they
wish to benefit ? including their own estate. Having made the
decision to exercise their right to transfer between schemes there
is a loss to the estate (
IHTM04054) of the member unless they
direct the death benefit to be paid to their own estate. Unless the
member directs the benefit to be paid to their own estate a
lifetime transfer (
IHTM14000) arises under IHTA84/S3 (1).
The valuation of the loss is very much dependant on the
transferor’s state of health and life expectancy at the date
of the transfer. If they are in normal health etc for their age and
therefore likely to survive to enjoy the retirement benefits (
IHTM17030) the loss is nominal. If on
the other hand their health is such that they are unlikely to
survive to enjoy these benefits (so that the death benefit will
become payable) then the loss to his estate is likely to be
substantive.
Details of any transfer between pension schemes within 2
years of a death should be shown on the form IHT409 (
IHTM10035) at boxes 16 to 21. Any case
with such details included on the form IHT409 should be referred to
TG in IHT Edinburgh.
If information comes to light of a transfer between pension
schemes within two years of the death which was not shown on the
IHT409 the case should be referred to TG in IHT Edinburgh to advise
on the investigation of the transfer.
