Annuity guaranteed period - non-qualifying beneficiaries
benjaminfabi
Moderator
Hi,
Does anyone know whether nominating adult beneficiaries to receive the death benefits from the guaranteed period of an annuity is a chargeable lifetime transfer?
It's not something I've ever thought of, and I can't help but feel that if it was, I'd already know, but nevertheless I can't find a reliable source that will tell me.
Benjamin Fabi
Comments
I don't think you'll find anything crystal clear it's - just first principles.
"do this when I die" - so transfer happens on death.
Your estate isn't going down when you nominate someone so no transfer of value.
The purchase of the annuity in the first place is a transfer of value and of course the value of the remaining guaranteed payments is in the estate.
Technically it would have been a PET as opposed to a CLT.
Okay thanks. So let's consider this scenario:
Is the transfer of value for IHT on the day the annuity is purchased:
Using first principles, I'd assume that if the transferor was in good health at the time, there is no transfer of value, as the insurer will retain discretion over who benefits (and this could always in theory be a qualifying person).
But what if they're not in good health? Is there an additional transfer of value that's the difference between the purchase price (i.e. what would/could have been retained in the pension fund) and the HMRC probate value on the purchase date?
Transfer of value when buying an annuity in good health will have no value as you were not intending to confer a gratuitous benefit on someone else, not because there was discretion etc
If not in good health then there will be transfer of value for the annuity purchase. Value - Something else. You'll not get a definitive answer to that one - never seen a case at tribunal where it's been argued. In theory it would be the net amount if you took it all as an UFPLS as that is what you have deprived your estate of. Prior to freedoms the value was PCLS and a G10 annuity.
And then the guarantee period in your estate, a transfer of value on death. Double charge relief should apply there.
This isn't new though that's always been the position.
PS I'd talk about exempt and non exempt beneficiaries when talking about pensions and IHT.
Qualifying and non qualifying is related to income tax on pensions when I first seen the post I assumed it was a question of guarantee periods being paid to trusts or estates!
Thanks, and noted on terminology! I'd used them synonymously but I suppose there is a technical difference.
In theory, however, HMRC still assume someone is not in poor health if they survive two years from the annuity purchase, even if they've received a medically enhanced rate.
I believe they do unless there is evidence to the contrary - which a medically enhanced rate may be evidence of! The 2 year rule is actually a reporting requirement /and a general rule of thumb. There is only a 7 year rules for transfers of value.
Very grey and very little publicly available to go on. You're in case by case land.