If it was not on your list of new year resolutions, then you need to speak to Quantum Advisory without delay.
In the budget speech last Autumn, the Chancellor announced that unused pension funds and death benefits will be subject to Inheritance Tax (IHT) from 6 April 2027.
So how does closing a tax planning loophole affect my business? I hear you say?
Well, from April 2027, most death benefits under registered pension schemes will also be included within members’ estates for IHT and the Trustees will be responsible for reporting and meeting any liability due.
Once again, I hear you say; A note in the consultation document states ‘life policy products purchased with pension funds or alongside them as part of a package offered by an employer are not in scope’.
It’s not clear what product this is referring to and whether defined benefit lump sum death benefits (DBLSDB) are out of scope. Let’s hope they are out of scope. We will need to wait until the end of the initial consultation period on 22 January 2025 for further clarity.
If registered pension schemes are in scope, then you will need to consider…..
- The structure of your group life scheme, with particular reference to how you provide life assurance on death in service.
- You will need to explain the new rules and tax implications to your employees, once they are known
- New processes will need to be agreed with scheme administrators to meet the new responsibilities of trustees.
- Pension scheme rules may need amending.
- If the value of the estate is within the IHT nil rate band, no IHT will arise. Indeed, money passing to a spouse or civil partner, will also result in no IHT tax liability arising, based on the current exemption, so employees may want to review their death benefit nomination forms.
Contact Graham Yearsley, Principal Consultant and head of Employee Benefits at Quantum Advisory to see how we can deliver better results for your business.
graham.yearsley@qallp.co.uk
07355 035237