Aegon issues IHT warning

Aegon Scottish Equitable has published a warning that many pensions investors may have unwittingly created funds that have crept above the inheritance tax (IHT) threshold.

The firm has suggested that investors making full use of an Isa or Pep since 1987, when they were launched, could by now have accumulated £375,000.

It observes that this is significantly higher than the current £300,000 threshold, meaning that on their death investors’ next of kin could be faced with a weighty IHT bill.

Margaret Jago, technical manager at the firm, explains: "We believe many individuals will have crept over the current IHT threshold without realising they have done so.

"While this type of investment is tax-free throughout their lifetime, when the investor dies, it becomes part of their estate for IHT purposes."

The government has recently committed to increasing the threshold for IHT to £350,000 by April 2010, although the Taxpayers’ Alliance continues to argue for its abolition.