Professionals with a significant amount invested in an occupational pension should take the opportunity to investigate how their lump-sum death benefit will affect their next of kin’s inheritance tax (IHT) bill, according to one expert.
Abbey Wealth Management’s Neil MacGillivray has reminded investors that the death benefit is not tax-free, because the debt is deferred to a spouse or civil partner.
Speaking to Citywire, Mr MacGillivray suggested that Britons should consider a "carve-out fund" instead, as a means of protecting money otherwise falling within the net of IHT.
Becoming a member of an occupational scheme, a lump sum is paid into the trust on the death of the settler.
The trustee is then afforded two years to allocate the death benefit without IHT implications.
Mr MacGillivray said: "Although this type of planning can be quite expensive, it is worth it for the potential IHT savings – all sizeable pensions should be part of a trust.
"Advisers who practise in this type of trust will be able to build up strong professional connections with professional trustees."
Recent research by the Halifax revealed that the number of properties exceeding the £300,000 IHT threshold has nearly doubled in the last five years.