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HMRC internal manual

Inheritance Tax Manual

Pensions: IHT charges: assignment of death benefits

The right to a death benefit from a pension scheme is often transferred irrevocably to a discretionary trust. Many pension providers have standard documents to put this into effect. This type of transfer or assignment is a lifetime transfer at the date of transfer and can result in a lifetime transfer of value if the scheme member is in ill-health at the time.

Not all cases though involve irrevocable transfers. Where a trust is:

  • only one of the potential beneficiaries, even if nominated in a letter of wishes, and
  • the pension provider retains the right to make a payment at its discretion

there is no lifetime transfer.

It is also possible that an irrevocable nomination could be made in favour of other beneficiaries. However, this is unlikely because a beneficiary who is an individual may unexpectedly pre-decease the pension scheme member.

Details of any assignment of death benefits within the 2 years before a death should be included on form IHT409 (IHTM17015).