IHTM17104 - Income drawdown: death claims on income drawdown

The ABI Guidance note ( IHTM17102) at 4.1 refers to cases where there may be a claim on to IHT on the death of a ‘survivor’ under IHTA84/S5 (2).

Where the member is in income drawdown ( IHTM17101) in a personal pension plan ( IHTM17022) and dies the ‘survivor’ (meaning the spouse/civil partner ( IHTM11032) or other financial dependent) can

• continue with income drawdown
• purchase an annuity with the remaining fund or
• take a lump sum within 2 years of the members’ death

If the ‘survivor’ dies within the 2-year period without having taken the lump sum IHTA84/S5 (2) applies on their death and the value of the lump sum is an asset of their estate ( IHTM04043).

Where the lump sum is taken it is paid subject to 35% income tax and the IHTA84/S5 (2) claim would therefore be on the net figure.

In an occupational scheme ( IHTM17021) there is no lump sum option to the ‘survivor’ and so no possibility of a IHTA84/S5 (2) claim.