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Alternative secured pensions hit by IHT

The Inland Revenue will apply inheritance tax to alternative secured pension assets upon death to avoid the schemes being used for avoidance.

Paymaster general Dawn Primarolo told Parliament this week that the Revenue is set to consult on how IHT law should be amended to apply to the simplified pension regime.

She expressed her concern that ASPs might be used for the inter-generational transfer of assets to avoid IHT, when they were introduced as an alternative to compulsory annuities for people aged 75.

Standard Life senior technical manager John Lawson says under the present regime, a Revenue statement of practice published in 1992, big pension contributions made in the two years before the contributor dies face IHT, but as a rule pensions are seldom touched by the tax.

While not wholly unexpected, Lawson says Primarolo’s statement confirms the Revenue’s plans and the consultation will allow for industry input.

Primarolo says: “The Revenue will shortly be publishing a consultation document setting out their analysis of the IHT issues. ASPs were designed to provide an alternative to annu-itisation for those with religious objections to riskpooling. They were not meant as a vehicle for inter-generational transfers by scheme members.”

Lawson adds: “This has cleared up the big issue in simplification at the moment and confirms people who use ASPs will face IHT.”

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