Q&As

Does a refund of contributions from a defined benefit pension arrangement, following the death of a member in deferment, form part of the deceased member’s estate for inheritance tax purposes (as per section 151 of the Inheritance Tax Act 1984, and IHTM17055) even where the refund of contributions is paid via discretionary trusts?

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Published on LexisPSL on 15/07/2019

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • Does a refund of contributions from a defined benefit pension arrangement, following the death of a member in deferment, form part of the deceased member’s estate for inheritance tax purposes (as per section 151 of the Inheritance Tax Act 1984, and IHTM17055) even where the refund of contributions is paid via discretionary trusts?

Does a refund of contributions from a defined benefit pension arrangement, following the death of a member in deferment, form part of the deceased member’s estate for inheritance tax purposes (as per section 151 of the Inheritance Tax Act 1984, and IHTM17055) even where the refund of contributions is paid via discretionary trusts?

HMRC has confirmed that a refund of member contributions payable on a member’s death under the scheme rules is a defined benefit payable as a defined benefits lump sum death benefit.

HMRC has further confirmed that the tax rules do not set any conditions on who can be paid a defined benefits lump sum death benefit. However the rules of the pension scheme may set limits on who it will pay this type of benefit to.

HMRC’s statement in IHTM17055 (that ‘refunds of the member’s contributions are assets of the estate as the scheme member is the only person entitled to these payments’) seems to rely on the

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