Background Note.
17.The Government announced in paragraph 1.117 of the Budget document (June 2010) that “it will end the existing rules that create an effective obligation to purchase an annuity by age 75 from April 2011 to enable individuals to make more flexible use of their pension savings. The Government will shortly launch a consultation on the detail of this change.”
18.This change will also apply for the purposes of the inheritance tax (IHT) charges that specifically apply to pension scheme members aged 75 and over.
19.Those specific IHT charges, included in sections 151A-151C of the Inheritance Tax Act 1984 (IHTA), are linked in to the pension tax rules and the definition of the different pension benefits. This means that once changes are made to the definition of an alternatively secured pension in Schedule 28 to FA 2004 so that it applies only from age 77 onwards, this automatically follows through for the purpose of these IHT provisions.
20.The changes do not however follow though for the purpose of the anti-avoidance provisions at section 151D of IHTA. These charges are triggered by an unauthorised payment charge and unlike the charges on alternatively secured pension funds do not apply automatically when a scheme member dies. The changes made by this Section and Schedule also leaves the prospect of a charge to IHT under section 3(3) of IHTA where the member of a registered pension scheme has reached age 75 and dies having deliberately omitted to take his retirement benefits so that the death benefits can pass to his chosen beneficiaries.
