Q&As

The deceased had a money purchase pension policy which had been an income drawdown policy since 2005. What details of the policy, if any, should be included in Form IHT409?

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Published on LexisPSL on 27/03/2018

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

  • The deceased had a money purchase pension policy which had been an income drawdown policy since 2005. What details of the policy, if any, should be included in Form IHT409?
  • Inheritance tax treatment of a drawdown pension
  • Form IHT409

The deceased had a money purchase pension policy which had been an income drawdown policy since 2005. What details of the policy, if any, should be included in Form IHT409?

This Q&A assumes that the deceased died after April 2011.

Inheritance tax treatment of a drawdown pension

Where a person elects to draw down all or part of their pension, they effectively become entitled to the funds which form part of the drawdown fund. Having become so entitled, if they failed to exercise their rights over those drawdown funds and left funds undrawn on their death, the general rule was that an inheritance tax (IHT) charge may arise.

In the Autumn Statement 2015 (confirmed in the Budget 2016), the government announced its legislative intention to ensure that no IHT will arise where a member dies while in drawdown without having drawn-out all of their funds. This measure was introduced in to the Finance Bill 2016 which became the Finance Act 2016 (FA 2016) receiving Royal Assent on 15 September 2016. A new section 12A of the Inheritance Tax Act 1984 was introduced by FA 2016, s 94 to provide an exemption so that an IHT charge will not arise where a person has failed to exercise their rights to draw designated funds from

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