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HMRC internal manual

Inheritance Tax Manual

Pensions: omission to exercise a right: examples of an actual pensions disposition

IHTA84/12(2F) defines an actual pensions disposition under a registered pension scheme as a disposition made by a person that falls within IHTA84/S3(1) by doing anything in relation to, or to rights under, the pension scheme. That means that there has to be a transfer of value, in this case in the two years before death.

Examples of an actual pensions disposition which, would be a disposition within IHTA84/S3(1) include the following transactions:

  • Taking out a new policy and assigning the death benefits on trust.
  • Assigning on trust the death benefits of an existing policy.
  • Paying further or enhanced contributions to a policy where the death benefits had previously been assigned on trust,
  • Moving from one pension scheme to another in exercise of the statutory right to transfer. In this case there are new death benefits. If the member exercises their right to determine how that new death benefit will be paid by, for example, assigning it on discretionary trusts outside their estate, there is a transfer of value under S3(1) . The value of the transfer will depend on the member’s state of health at the time.
  • Reducing the amount of income taken when the pension scheme member is in ill-health. Any case where this occurs should be referred to Technical for advice.

Not all situations where this would apply are covered here and there may be other dispositions that would be actual pensions dispositions.