Before pension freedoms, it wasn’t uncommon for death benefits from a pension to be placed into a Bypass trust.
Since then, with the ability to pass pensions down the generations free of IHT, use of this type of trust has declined. Whether that's under the current rules, or once the proposed changes to pension and IHT land in April 2027.
In this session, Senior Technical Manager Neil Macleod looks at where we stand now and why the bypass trust still has a place in financial planning.
Learning outcomes
By the end of this session, you will be able to:
Claiming your CPD
To claim your CPD certificate, test your knowledge with the questions below.
Write down your answers to each of the following questions and check your answers when you click to claim your CPD certificate on the link below
A. What are the 2 main uses of bypass trusts?
- Flexibility and control
- Investment choice and tax efficiency
- Control and tax efficiency
- Control and investment choice
B. Andrew dies in November 2025, aged 78 with an uncrystallised Personal Pension. He has nominated a trust to receive the death benefit of £500,000 on his death. When the scheme trustees pay the death benefit to the trust how much is the tax charge?
- It depends on how much IHT is due
- £100,000
- £200,000
- £225,000
C. Amy dies in June 2026, aged 73 with a Drawdown pension which she crystallised in April 2020. The death benefit of £300,000 is paid to a bypass trust. Amy has a Lump Sum Death Benefit Allowance of £200,000 available. How much tax is the tax charge on payment to the trust?
- Nil
- £20,000
- £45,000
- £100,000
A. What are the 2 main uses of bypass trusts?
- Flexibility and control
- Investment choice and tax efficiency
- Control and tax efficiency
- Control and investment choice
B. Andrew dies in November 2025, aged 78 with an uncrystallised Personal Pension. He has nominated a trust to receive the death benefit of £500,000 on his death. When the scheme trustees pay the death benefit to the trust how much is the tax charge?
- It depends on how much IHT is due
- £100,000
- £200,000
- £225,000
C. Amy dies in June 2026, aged 73 with a Drawdown pension which she crystallised in April 2020. The death benefit of £300,000 is paid to a bypass trust. Amy has a Lump Sum Death Benefit Allowance of £200,000 available. How much tax is the tax charge on payment to the trust?
- Nil
- £20,000
- £45,000
- £100,000
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