Pensions Transfers and IHT
Kelly
Member
Hi all,
We have a client in ill-health (not serious ill-health), looking to transfer their existing PPPs to a new PPP as they are soon 75 and existing provider will not allow benefits to be deferred beyond age 75.
Client is already retired and doesn't need additional income. I would be interested to hear your views on the impact of the 2 year rule if client were to die after transfer.
Thanks very much!
Comments
To me, that looks like a transfer of value (which is where the potential IHT arises from) so could get caught if IHT 400 is required (and consequently IHT409).
It is definitely a transfer of value - all transfers are. And will need reported to HMRC on deathwithin 2 years.
What you need to decide is what the value of that transfer will be.
I think you would be arguing that it was exempt under s10 as they were not intending to confer a gratuitous benefit on someone else. And if the only reason for transfer was you couldn't stay in your current lan you;d ave a good case.
But mention of better death benefits, more flexible death benefits or even changing the nominated individual or anything like that and you open the door to a challenge.
Hard to see how a transfer could be seen as anything other than to improve the position on death, regardless of any explicit reference. The intention is to avoid a default action at age 75 that would not provide value to the estate. This is the gratuitous intent - they aren't doing this for their own retirement reasons but to continue to defer taking the benefits.
Unless they want to transfer so they can get more money out and enjoy life/pay for medical care etc ie spend it having had it taxed as income.
I'd fully expect this to be a taxable transfer if they die within two years.
The gratuitous intent is supposed ot be conferred on some other person. I think deferring benefits until you need them being deemed gratuitous intent might be a bit of a stretch. But like all these pension IHT questions we'd only know the answer after a tax tribunal!
But wouldn't the completion of a nomination form in the new plan constitute the intent on some other person/s. Even if you don't change the existing beneficiaries, they cease to have a right to benefit in the current plan at age 75.
The OP has said that the member doesn't need further income, and this would be a simple matter of fact in a challenge.
I agree that it would be settled in a tribunal on the merits at the time, but if I was writing a suitability report I would be strongly highlighting this aspect.
Agree completing the nomination could be seen as intent to confer, definitely if the nominee changes - arguable if they don't.
And I'd be making sure they were fully aware of the potential IHT impact as a downside of my recommendation too.
Thanks for the responses all, much appreciated.