This could have been on a bulk basis when a scheme closed, or where an individual money purchase plan is assigned from the scheme to the individual when they leave employment. These should be checked if there is any doubt.
The final thing to be aware of is the “power of disposal”. If the scheme has no discretion and the member can dictate who death benefits are paid to, then this would be included in the estate.
Likewise, the construction of a scheme's rules may be such that an action of the member could result in payment being made to an estate, for example, if no expression of wish is received or an expression is rescinded then the rules may dictate the benefits are paid to the estate.
Some schemes do have binding nominations that are “IHT friendly”. This could be where the binding nomination is irrevocable, or only allowed when a scheme is first joined. If in doubt, it is best to check with the specific scheme.
The Nest scheme death benefit arrangements are just one example of the complexity that members can face. In this scheme, binding nominations can be changed or members can make a nomination giving trustees discretion over how death benefits are distributed.
If nothing is noted, then the benefits are paid to the estate. This means that different members of the same scheme can have different IHT positions.
3) Changes, transfers, disposals and contributions made within two years of death
As most pension death benefits are not chargeable to IHT, it can provide an opportunity for people in ill-health to use their pension schemes to pass value to otherwise chargeable beneficiaries without a tax charge.
HMRC is on the lookout for changes to pensions made prior to death seeking potential transfers of value.
It deems all pension transfers to be transfers of value. While a pension does not arrive back in your estate mid-transfer, you could ask for it to go to a scheme that pays to the estate on death.
Some transfers can be exempt if it is found there is no attempt to confer a gratuitous benefit on another — for example, you were transferring to get better terms, or the retirement options you required were not payable from your existing scheme. It is a nuanced and particularly individual area and not one where you could be categorical that a transfer would not have IHT implications.
A clear transfer of value is a plan having the death benefits put under trust where they would otherwise be payable to the estate. Likewise, unusual levels of contributions into a pension, where death benefits are paid under discretion by a member or their employer, may attract scrutiny.
