Relevant property charges: Status of funds after death but before payment
When a person dies and the rules of a trust-based pension scheme mean that a lump sum death benefit becomes payable, this sum is held by the pension scheme trustees on trust before the payment to beneficiaries. But, it is no longer being held for the purposes of the pension scheme.
IHTA1984/S58(2A) applies to treat the funds within:
- a registered pension scheme (IHTM17021),
- a qualifying non-UK pension scheme (IHTM17025), or
- a section 615(3) scheme (IHTM17026)
as continuing to be held for the purposes of the scheme as follows -
For a registered pension scheme - from the time of the member’s death until payment is made if the payment is a lump sum death benefit within FA2001/s168(1).
For a qualifying non-UK pension scheme (IHTM17025) or a section 615(3) scheme - from the time of the member’s death until payment is made, if the benefits are paid out within a 2 year period beginning with the earlier of -
- the day on which the member’s death was first known to the trustees or other persons having control of the funds, and
- the day on which they could first reasonably be expected to have known of it.
You are unlikely to see payments made outside a 2 year period but, if you do so, you should refer the case to Technical.
This provision does not extend to employer-financed retirement benefit schemes (EFRBS) which are already relevant property trusts and remain so after a death. But it can apply to protected schemes (IHTM17039).
A lump sum paid as part of a pension or annuity arrangement that is in payment is not affected by this provision as the property is not generally settled property in the first place.