Pensions - Articles - Comment on pension transfer inheritance tax case decision

 "In HMRC v Parry, the Supreme Court has held that the payments to Mrs Staveley’s sons are subject to inheritance tax, because she chose not to take her pension, but allow the benefits to instead be used to provide a benefit to her sons on her death. The Court has made it clear that there is no inheritance tax due because of the transfer she made to the pension scheme before her death, in these specific circumstances, because she did not have the inheritance tax position in mind when she did that."

 "The industry had been worried about the risks relating to transferring a pension during a period of serious ill health and will no doubt welcome this result. However, the Court’s decision also highlights a broader risk relating to decisions members make about their pensions. A decision (or even a failure to take an option) by a member that reduces their benefits under the scheme and increases those of anyone else (even without knowing who that someone else will be) is a “disposition” and may well, in the right circumstances, mean a charge to inheritance tax on the member’s death. This can cover a lot of decisions, from those, like Mrs Staveley, who choose not to take their pension at the first opportunity, to those who make use of the “freedom and choice” developments from 2015 to provide draw down for dependants."

 "The pensions industry will now be alert to the risk that actions by members, within the scheme rules and the pension tax rules, may still give rise to inheritance tax. The attractiveness of pensions as a tax efficient environment may well be greatly reduced by HMRC’s powers in this area."