Clare Moffat, Technical Manager, looks at the benefits of pensions from an IHT perspective.
100% access and 100% discount – what type of wrapper could this be? A pension!
Post flexibility there is 100% access (for those over 55) and normally pensions are inheritance tax (IHT) free. With flexibility the options available on death mean that pensions should normally be first in, last out.
However, the word ‘usually’ or ‘normally’ will often precede the words ‘IHT friendly wrapper’. Why? In what scenarios does IHT apply? How does it work for contributions? What happens with spousal bypass trusts (SBT)? Pensions are known to be an IHT friendly wrapper but is that always the case?
To fully understand the benefits of a wrapper then we also need to understand the limitations.