The estates of high earners with unfunded company pension arrangements could be hit by an inheritance tax charge on their arrangements, says Watson Wyatt.
The company says that, as it is written, the Finance Bill will remove the inheritance tax advantages of unfunded unapproved retirement benefit schemes, leaving the estates of some senior executives who benefit from such schemes facing an IHT liability even though the pension benefit dies with the earner.
Watson Wyatt says it bel-ieves the issue must be an unintended consequence of the way that the bill has been drafted and is calling for it to be changed.
Uurbs are seen as a popular method for companies to provide pension benefits for employees who are restricted by the pension earnings' cap. Uurbs have a value when an executive is alive but, upon death, that value dies with them apart from any spouse's pension.
IHT is calculated on the value of a person's wealth just before they die so the underlying value of the Uurbs would be included even though it would have no value immediately after death.
Partner Sue Bartlett says: “Many companies use Uurbs as a way of providing pensions for their senior executives and if this provision is not changed, there would be a significant impact on the posttax value of their estate.”