As most professionals, and indeed civilians with the misfortune to be contemplating a loved one’s estate in the post-April 2027 world, will have noticed, updates with practical advice on this matter have so far been scant. New guidance has therefore been gratefully received, coming in the form of a second technical note issued by HMRC, providing more operational detail on how estates will be dealt with under the new rules.
The onus is now mostly placed on executors and other personal representatives, who will take the lead in identifying pension arrangements, obtaining the pension values and combining these with the rest of the estate when calculating the IHT liability.
The note also sheds further light on the new information-sharing framework that will sit behind the reforms. Pension scheme administrators, insurers and personal representatives will be required to exchange information following a death to enable pension assets to be identified, valued and incorporated into the inheritance tax calculation. New procedures are also outlined for withholding pension benefits where an inheritance tax liability is anticipated, as well as mechanisms allowing pension scheme administrators to make direct payments towards tax liabilities.
HMRC has additionally provided further clarification around the concept of “notional pension property”, the valuation of pension benefits for inheritance tax purposes and the treatment of beneficiaries, including trusts. The note also includes draft guidance on establishing an executor’s authority when dealing with pension providers, a practical issue that many practitioners had identified as a potential stumbling block.
While the new information has been welcomed by virtue of clarifying the situation, professional bodies including STEP have raised concerns about the added administrative burden now placed on executors in managing a process that is less efficient, more complex and, therefore, more expensive. Further technical guidance is expected later this year, including on international cases, trusts and charities, but for now the direction of travel is becoming increasingly clear: pensions are no longer likely to enjoy the privileged status they once held as an inheritance tax planning tool.
If you would like to discuss how the forthcoming pension inheritance tax reforms may affect you or your family, Belluzzo International Partners’ specialist private client advisers are on hand to help. Please contact our team for tailored advice on estate planning, succession planning and inheritance tax matters.
Giacomo Francioni
Patrick Jordan
