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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Pensions: IHT exclusions: omission to exercise a right

IHTA84/S3(3) treats an omission to exercise a right as a disposition where

  • a person’s estate is diminished and
  • the value of another person’s estate or of settled property is increased as a result (IHTM14810).

In general, this can include a situation where a person does not exercise a right to take pension benefits and so increases the death benefits payable outside the estate. However, for deaths on and after 6 April 2011, where a member of:

omits to exercise a right to take available pension benefits from that pension scheme, this provision no longer applies. The provision can still apply where the death is before 6 April 2011. It also continues to apply to pension schemes other than those above, mainly employer-financed retirement benefit schemes (EFRBS).

IHTM17400 gives further details of the section IHTA84/3(3) charge in relation to pension rights and the circumstances where we would apply such a charge.