Inheritance Tax on Pension

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
3 replies 601 views
Old_SlapheadOld_Slaphead Forumite
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Suppose I had a pension fund of £1million (I wish) that gave an annual pension of say £60,000pa with 2/3rds to partner (common law, not civil partnership) on my demise - would that pension payment be deemed to be part of my estate for IHT and, if so, how would the gross value be assessed?

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  • EdInvestorEdInvestor
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    No.Pensions are not part of your estate for IHT purposes. Obviously the spouse's pension in payment will be subject to income tax, just like the main pension.If the pension comes from a fund in income drawdown, it can be paid to heirs on your demise in cash, minus a 35% tax charge (effectively you are repaying the pension tax relief) but no IHT.

    If you die before you start taking the pension the whole fund goes to heirs tax free.
    Trying to keep it simple...;)
  • Andy_LAndy_L Forumite
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    Part of the Furniture 10,000 Posts Name Dropper
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    Also consider that "common law" has very little meaning in UK law, in particular there is no IHT exemption
  • Andy_L wrote: »
    Also consider that "common law" has very little meaning in UK law, in particular there is no IHT exemption

    Furthermore the partner you live with is not a "common law" anything whatever rights can be realised have nothing to do with common law - its a complete misnomer.
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