This short video takes a look at pensions and inheritance tax planning, an important aspect of Estate Management and Planning. The right type of pension, set up correctly, can be a tax efficient way to pass on your wealth.

A video transcript is provided further below, if you would prefer to read about it.

Pensions and Inheritance Tax Planning – Video Transcript

A pension plan can be a very tax-efficient way to pass on your wealth.

Pension death benefits are typically free of inheritance tax which opens valuable planning opportunities.

It may be possible in certain cases to pass on a pension plan to future generations. This can have a beneficial impact in several ways including helping to reduce an inheritance tax liability.

For example, by keeping as much money in tax efficient pensions, and instead releasing money from other sources that are subject to inheritance tax.

Exactly how your pension would be treated on death is dependent on several factors.

If you have what is known as a defined contribution pension such as a personal or stakeholder pension plan, then you can arrange for this to be passed to beneficiaries who effectively inherit the money and the pension plan from you. This also applies to most pensions in drawdown.

But not all pensions are this straightforward and some can have a liability to inheritance tax.

So you should make a point of checking this out and understanding the position precisely based on your own circumstances.

There could be a significant opportunity to use your pensions to help reduce a future inheritance tax liability. But this needs to be investigated with a qualified advisor and a plan formed considering all aspects, as well as your unique position and goals.

Important Notes:

  • Pension pay-outs on death are usually free of IHT. However, there are cases where this may not apply and the pension could be subject to IHT.

  • There are different types of pension, known as either Defined Contribution Pensions or Defined Benefits Pensions.

    The type of pension could make a difference to how it pays out on death.

  • Whilst a pension is there primarily to provide an income in retirement, in the right circumstances it could also be part of your IHT planning.

  • You should check carefully how your pension is structured, who it is going to be paid to on death and the tax position applying. Making sure it is set up exactly in line with your wishes.

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To speak to an IFA about pensions and inheritance tax planning, contact Tony Thomas on 07585 592494 or