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Bee cautious on IHT potential of family pensions

Pension guru Steve Bee says he cannot believe the Inland Revenue will allow assets such as family homes to be passed down between generations tax-free in a new family pension scheme.

His comments follow confirmation by the Revenue that its recent attack on inter-scheme transfers is not meant to rule out family pension schemes but is instead aimed at small self-administered schemes.

It is thought family pensions will become viable as a result of the new pension rules coming into effect in April 2006 and will allow assets to pass down through the generations.

Standard Life senior technical manager John Lawson says the Revenue has confirmed to him that its recent technical note is a clampdown on the reallocation of assets between SSAS members.

Once members have used enough of the fund to pay them two-thirds of final salary, the excess will no longer be allowed to be passed to other scheme members after A-Day and will be taxed at the 55 per cent recovery rate.

Lawson says the family pension is safe under the regulations as currently drafted. However, he says uncertainty still surrounds whether the Revenue will retrospectively impose inheritance tax on such schemes.

Bee, who is head of pension strategy at Scottish Life, says the Revenue’s technical note is unclear and he finds it difficult to believe the Revenue will allow family residences to be passed down between generations in a tax-free wrapper.

Lawson says a lesser known aspect of Sipps after A-Day is that individuals will be able to receive tax relief not just on residential and buy-to-let properties but also classic cars, fine wines and art. So, in theory, someone wanting to put a Matisse or other such collectable painting could end up getting millions of pounds of tax relief on it.

He says: “There is a lot of talk that family pension schemes have been killed off but that is not true. The new rules to counter intra-scheme transfers are aimed at SSASs and mean there will be a recovery charge on any part of the fund not being used to pay your benefit.”

Bee adds: “The note from the Revenue was suitably Nostradamic and I cannot believe it will allow parents to pass down family residences to 55-year-old non-dependent children without paying IHT.”


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