Techy Thursday – August 2026

Q. Any thing about Pension Term Assurance?

A. Not specifically. Pension term assurance is a life policy written under a registered pension scheme. Where it pays a lump sum death benefit it will, like other pension death benefits, fall within “notional pension property” from 6 April 2027.
 

Q. Is the 10% charity donation before or after tax if using the pension?

A. The reduced 36% rate applies where at least 10% of the “baseline amount” – broadly the net estate component after deducting the available nil-rate band but before the charitable gift itself – passes to charity. Pension funds will sit within the “general component” of the estate, so pension assets count when testing the 10% threshold, and charitable payments from the pension can help meet it. So before any income tax.
 

Q. Regarding Estate and gifts treaties like with the U.S. and a few other countries, will UK pensions be exempt from IHT as they are not caught in the text of the Agreement?

A. This is a complex are and will be treaty-specific. We always recommend that an adviser that is qualified on both tax regimes be consulted for cases like this.
 

Q. So are all death bens taxed at 40% regardless of death before/after 75?

A. No. Inclusion in the estate does not mean an automatic 40% deduction. The pension is added to the wider estate, then available nil-rate bands, exemptions and reliefs are applied, and only the remaining chargeable balance is taxed at 40% (or 36% with the charity reduction. Age 75 is irrelevant to IHT; it governs only the separate, and unchanged, income tax treatment of death benefits.
 

Q. Why do you need to check the RNRB on first death?

A. On first death you need to establish whether any RNRB was lost to taper – even where everything passes spouse-exempt – because that affects the brought-forward (transferable) RNRB available on the second death.
 

Q. If a married couple has an estate worth over £2 million and a tapered NRB, does the spouse who dies first pass their NRB and tapered MRNB to the surviving spouse, and is the overall IHT liability then paid on the second death with a reduced MRNB?

A. Broadly, you just run your IHT sums on the survivors estate with the increased NRBs but there is only a taper on first death if the estate of the deceased is over £2m.
 

Q. On the first death, if everything goes to a spouse, can there still be a loss of the transferable RNRB? In other words, if the first person to die has an estate worth over £2 million, does the RNRB still reduce even though everything passes to the surviving spouse?

A. Yes, as per the answer above.
 

Q. The owner of QROPS dies, leaves 100% to Spouse, does this simply fall into spouse exemption, ie, no tax liability?

A. The new rules apply to QROPS too so the answer is basically yes.

 

Q. How will PET operate: will there be any variations to be aware of?

A. The pension IHT reforms do not alter the position for lifetime transfers; each gift is still tested against the normal rules.

Q. Will death in service arrangements written as Excepted schemes also fall into the DIS exemption as these are not pension death in service arrangements?

A. Excepted group life schemes that are not written as part of a registered pension schemes are not in the scope of these new rules and there IHT treatment will remain as it currently is i.e. depends on trust structuring etc.
 

Q. If LPRs pay the IHT from pension assets, do the beneficiaries still suffer an income tax charge?

A. Where IHT is paid in respect of the death benefit, the portion of the benefit corresponding to the IHT (and interest) paid does not count towards the beneficiary’s taxable pension income. So if the scheme pays the IHT, the balance is taxed under the normal post-75 rules; if the beneficiary/PRs pay it, the beneficiary reduces their taxable pension income by the IHT amount.
 

Q. Assume just one beneficiary to an estate, will it be possible to pay 100% of an inheritance tax liability from the pension only, as it will be permissible to pay 100% from non-pension assets?

A. No. The pension can only meet the IHT attributable to the pension itself, via a payment notice. It cannot settle the IHT on the rest of the estate, it is limited to the notional pension property’s proportionate share, plus interest.
 

Q. Is it only possible for the pension to pay the IHT due on the pension assets, or can it also pay the IHT for the whole estate?

A. Only the IHT attributable to the pension.
 

Q. Pensions can have different beneficiary than the Will. Does the PR have the power to choose which element pays IHT & can that be challenged by beneficiaries? Can direction be given in the Will or through a Letter of Wishes on how I would want my estate's IHT to be paid given Pensions aren't in Wills?

A. IN principle yes, they can pay IHT from estate and recover from beneficiaries or they can force pension scheme payment, subject to the payment notice conditions being met.
 

Q. How will the LSDBA rules work where IHT is also due i.e. where the scheme can only pay out the Death benefits paid out as a lump sum?

A. The lump sum and death benefit allowance (LSDBA) and the income-tax charge on any excess – including the 45% special lump sum death benefit charge under s206 Finance Act 2004 – continue to operate alongside IHT as separate charges. Any IHT paid by the scheme directly will be deducted from the pension, the remainder will then be tested against the LSDBA if the death benefits are paid as a lump sum.

We await further guidance on the interaction of IHT with the LSDBA and the 45% charge.
 

Q. Is buying an annuity deemed a transfer of value?

A. It is, as by definition you will be making your estate smaller. If the annuitant was in normal health the loss to the estate is likely to be nominal.
 

Q. If a fixed-term annuity is set up with no death benefits, would this be excluded?

A. A fixed-term annuity with no death benefits would have nothing to pass on at death, so nothing enters the estate from it. Any remaining fund or guaranteed maturity value that is payable would be notional pension property.
 

Q. Didn't understand your Bombay Duck slide...if you have a £500k pension and you take an annuity out on that, I thought that disappeared from your estate?

A. That is the point of the analogy – a fixed-term annuity is really a drawdown contract or a pension scheme investment, not a true lifetime annuity, so it does not remove the fund from your estate. A genuine lifetime annuity purchase removes the capital (you have exchanged it for income), but a fixed-term annuity retains a fund/maturity value that remains notional pension property.
 

Q. Joint annuity including 50% widows benefit including guarantee period such as 10 years - what is the IHT treatment / calculation if the annuitant dies before the end of the guarantee period - the annuity continues at 100% for the remainder of the guarantee period before reducing to 50% after?

A. The joint-life (survivor) element is an excluded benefit where the dependant’s/nominee’s annuity was purchased together with the member’s lifetime annuity, so it is outside notional pension property.

The guarantee-period element is brought into scope from April 2027 as notional pension property and valued for IHT – HMRC provide a guaranteed-annuity valuation calculator for simple cases.
 

Q. Can you clarify annuity purchase and death. If a client uses a large lump sum from the pension to buy an annuity and dies within 2 years how does this work for IHT? Assume no value protection or guarantee periods etc.

A. With no guarantee or value protection there is no residual death benefit, so nothing passes to the estate from the annuity – the capital left on purchase. The two-year point is an ill-health/reporting flag: if the member was in ill health at purchase HMRC may treat it as a transfer of value, if the annuitant was in normal health the loss to the estate is likely to be nominal.
 

Q. Are there any IHT issues if a 70-year-old client buys an annuity and names their child to receive 100% of the income on death? This would remove money from the estate and provide a lifetime benefit to the child.

A. A joint-life / nominee’s annuity purchased together with the member’s lifetime annuity is an excluded benefit, there is no requirement for the other life to be a dependent – so the continuing income to the child is outside the estate. But purchasing it specifically to benefit a non-dependant can itself be a transfer of value at outset so could have IHT consequences if it was purchased in ill health with the primary motivation of conferring t a benefit on someone else.

Q. Will escaping to Cyprus (for example) mitigate IHT (after some time)?

A. If they get to a point where the cease to be long term resident in the UK then they will only have IHT on their UK assets so if they move and all the assets are UK assets no. If some are non UK assets yes. But haven't a clue what happens to your estate when you die in Cyprus.
 

Q. Would you encourage clients with Property or Agricultural land (illiquid assets) within their SIPP to sell or buy out of the SIPP ahead of April 27?

A. This is a case-by-case decision that should not be driven solely by liquidity. Schemes have managed illiquidity before (e.g. lifetime allowance charges, pre freedoms death tax charges), HMRC may allow payment by instalments, and SIPPs/SSASs can sometimes borrow against assets. Whether to restructure depends on the client’s objectives, not simply the IHT changes date.
 

Q. Is it permitted for a pension owner to take tax free cash, split it with their spouse, then they both make individual gifts to trusts? There is mention that this is treated as a gift from the pension owner and not from the spouse – please can you clarify this?

A. Care is needed – where funds originate from one spouse and are routed through the other to make gifts, HMRC may treat them as gifts by the original owner. A genuine, unconditional inter-spouse transfer followed by the recipient making their own gift can work, but contrived arrangements risk challenge.
 

Q. If the pension can pay all the IHT bill - should they do this after age 75 because of the income tax issues?

A. The pension can only pay its own share of the IHT, not the whole bill. But post-75 it is generally sensible to have the scheme pay the pension’s IHT, because the portion covered by IHT then drops out of the beneficiary’s taxable income, you would struggle to find a more tax-inefficient asset to use instead.
 

Q. Is this another good reason to consolidate multiple pensions into one (subject to usual checks of course) to keep things simple for the PRs? i.e. not having to deal with multiple pension providers on death!

A. It could be a reason, but if it’s the sole reason it may be difficult to justify and get past a compliance check. Consolidating the paperwork on all pensions would simplify the PRs job too, albeit they would have more schemes to contact for info.
 

Q. If a client dies after age 75 and monies not going to spouse would you always want the pension to pay any IHT? I.e. beneficiaries are going to pay tax on pension so best to use these assets for the IHT?

A. Probably. Post-75 the pension is subject to both IHT and beneficiary income tax, so it is probably the most tax-inefficient asset available.
 

Q. Any options for a client with an IHT liability, she has a post 75 beneficiary drawdown pot, client has £40k of gross income. Still widowed and the estate with the beneficiary drawdown would be hit with £1 million tax bill post 2027?

A. It’s quite specific for a generic answer the right option depends on her need for access and control.

There are really only 4 options spend more, gift more, insure the liability or use a relief. All these options post 75 will need to consider the income tax liability and whether the income tax hit is worth the avoiding of the high tax on death with a pension post 75.
 

Q. Would you still advise a DGT on red money? No income needed.

A. No, a DGT for a client with no income need would be the wrong advice. A discounted gift trust is designed to provide a fixed income stream, so if no income is genuinely needed it is not objective-aligned. It’s also worth noting that the income from the DGT is actually a return of capital, and would therefore not qualify as income for the normal expenditure exemption.
 

Q. What are your thoughts on simply having conversations with clients about this now, versus actually advising them to mitigate their position based on the rule changes from April? We're meant to advise based on current tax rules, and things could change.

A. You could argue that these are the current rules, as the primary legislation has been enacted with a commencement date of 6 April 2027. Moving money that is available tax free and is not required should probably have been getting moved before these rules came in if increasing legacy was an objective for the pension due to the post 75 income tax treatment.
 

Q. You have spoken before about investing the monthly premium instead of arranging life insurance and how you would be better off assuming average life expectancy, but what about the immediate liability?

A. A valid point. Doing whole of life to fund an IHT liability is a valid option. But doing it as a wealth transfer play with all your pot to create legacy is different in our view.

Part annuitising to fund an immediate / future liability and fully annuitizing an amount beyond the liability we think is two separate planning considerations.
 

Q. Are there any serious considerations to make regarding nominations?

A. Not directly related. Reviewing nominations to reflect who should benefit, should be routinely done. If you have nominated someone that is not exempt then you may want to consider whether that is still the most appropriate way to arrange your money. Conversely, you may wish to use NRB on first death if the spouse is nominated. As a minimum you need to know the impact fo the pension nomination on the IHT bill.

Q. The Penny scenario – both trusts are offshore?

A. Yes – in the Penny case study the discounted gift trust and the loan trust both use an offshore bond, with an investment horizon of 10 years+ and a basic-rate income tax liability expected we’d think gross roll up had plenty of time to work.
 

Q. Tax implication of selling the beneficiary DD (Penny case study) again please.

A. Penny’s beneficiary drawdown was inherited tax-free because her husband died pre-75, so withdrawals to fund the trusts are free of income tax.
 

Q. Would “Penny” not pay income tax to get the funds out the pension to pay into the trusts?

A. No – because her pot is a beneficiary drawdown inherited from a spouse who died before 75, it is tax-free on withdrawal, so she can move it into the trusts without an income tax charge.
 

Q. Re Penny's case study - would you consider leaving more to cover potential care costs (£80,000pa average)?

A. Yes – care is a genuine “need”, and we may have but her properties earmarked for care.
 

Q. Does the example for pension work for larger pension pots in excess of £1.5m where withdrawal would be taxed at additional rate?

A. The theory holds but the numbers shift. You would need to model each death-timing scenario; the viability of options can change with the member’s/beneficiary’s marginal rate. The case study assumed additional rate tax on withdrawals and 40% taxpaying beneficiaries.

Q. Apologies if I missed this, but the £200k that was taken from NRB, where did that derive from?

A. The £200k is the RNRB taper: the estate exceeds £2m. IT was £2.4million meaning loss of £200,000 RNRB.
 

Q. Why would you execute Loan trusts before discounted gift trusts?

A. To mitigate future periodic/exit charges (the Rysaffe principle). The order of gifting should be:

1. loan trust,
2. chargeable lifetime transfer (CLT),
3. potentially exempt transfer (PET);

A loan trust involves no transfer of value (the outstanding loan stays in the estate), so establishing it first keeps the discretionary DGT’s full NRB intact.
 

Q. For the widow, how does she get the beneficiary drawdown into the discounted gift trust?

A. She draws the money out of the (tax-free) beneficiary drawdown pot and uses it to make the investment into the DGT, i.e. the pension is accessed and the withdrawn funds are settled into the trust (a CLT of the estimated gift element). In Penny’s plan £484,000 goes into the DGT (estimated gift £325,500), with a loan trust taking the balance.
 

Q. Please explain your final example regarding the Loan Trust. If the annuity income is added to the Loan Trust, surely this increases the loan? This was not shown in your calculation.

A. No, we were using normal expenditure exemption so they were additional gifts.

A loan trust can be added to by way of gift, additional loan or both. We also waived the loan on death to allow a large sum to be available prior to probate being granted. 

Q. Are organisations still lobbying to stop this or has everyone given up and accepted position?

A. The measure is now enacted, so it is law. Industry engagement we have seen was lobbying against the mechanics of implementing the policy e.g. a standalone tax charge would have been far simpler and achieved similar objectives, as opposed to the policy itself. We are not aware of anything suggesting it will be reversed or delayed.
 

Q. Will relevant life plans be taxed?

A. Relevant life policies not written under a registered pension scheme are not subject to the notional pension property provisions. They follow ordinary trust principles (normally outside the estate where properly written in trust).
 

Q. Mr dies with all to spouse, but his estate is >£2m. Mrs dies years later, how would Mrs executors know how much taper has happened...is there a document that confirms this on Mr's death?

A. We’re not close to the practicalities but understand Mrs PRs will need to collect the necessary information to be able to submit the claim.
 

Q. How will Scheme Pays apply to SIPP comprising commercial property only?

A. This is one of the recognised liquidity challenges. A payment notice requires available funds in the scheme; if the only asset is commercial property there may be nothing liquid to pay from until it is sold. HMRC has acknowledged illiquid SIPP/SSAS cases; options include instalment arrangements, borrowing against the asset, or the beneficiary/PRs funding the IHT from elsewhere. We suspect more guidance will follow.
 

Q. Income tax reclaims - have seen HMRC guidance that you can reclaim income tax if you didn't ask the pension to pay a portion of the IHT, but can't claim more relief than IHT proportioned to the pension. Mainly when the pension has caused loss of MRNRB.

A. Where the beneficiary/PRs (not the scheme) pay the IHT, the beneficiary can reduce their taxable pension income by the amount of IHT attributable to the pension. The relief is limited to the IHT proportioned to the pension, so it cannot shelter income tax beyond the pension’s own IHT share, even where the pension’s inclusion increased the overall bill by tapering the RNRB.
 

Q. Can we cover that Double Taxation slide again. It didn't make sense to me as I thought the beneficiary would receive £60k and, assuming deceased was 75, drawing on that £60,000 would be taxable as income = double taxation.

A. It is not double taxation. Take a £100k benefit: if the scheme pays £40k IHT, only the remaining £60k is taxable pension income (post-75). If the beneficiary pays the IHT, the £40k covered by IHT drops out of taxable income, so they are taxed as if they received £60k. Either way, IHT and income tax do not both bite on the same slice of the benefit. You can argue that it is or isn't double taxation but it doesn't really matter at the end of the day the tax is what it is.
 

Q. If the Fixed Term annuity has a guaranteed maturity value say 3 years after the pensioner dies (and say with no income being paid), how can it settle any IHT due on the pension share of the deceased's estate?

A. This is a liquidity/timing issue – IHT is due within six months of the end of the month of death, but the maturity value may not be accessible until later. In practice the IHT would need to be funded another way (executor’s loan, other assets, instalments) and reconciled when the value pays out. That of course assumes there is no death benefit/surrender option.
 

Q. Are the days notice for info working or calendar days ie do providers have 28 working or calendar days to provide info requests?

A. Calendar days.
 

Q. Would this be a massive problem for SIPPS/SSAS with a property as the only asset, such as offices? Values could take a long time and funds may not be available until property sold.

A. Estates that do not include pensions need to deal with he exact same issues today. It is an issue and will be an issue for more with IHT in the net. Schemes have had to deal with high tax charges on death in the past so it is not entirely new.
 

Q. Can IHT bill be later reduced/reimbursed in respect of Pension assets if they've fallen in value from Date of Death to time of distribution?

A. HMRC has confirmed that loss-on-sale relief – available for quoted shares and land in the free estate, does not apply to pension assets. So a fall in value between death and distribution does not automatically reduce the pension’s IHT, unlike some non-pension assets.
 

Q. How much are advisers expected to get involved with all of this process, or will the status quo remain in the majority of cases whereby Solicitors will just deal/advise with most of it and charge a good bit more?

A. It’s up to each adviser what they are qualified and insured to get involved in. We would imagine for most it is a case of supporting the family and working with a suitably qualified solicitor/estate practitioner.
 

Q. Who is entrusted for calculating the IHT liability for the Personal Representatives, as I am aware they could face liability for tax errors?

A. The PRs are responsible for reporting and paying and HMRC will have tools to help. We’re not experts in estate admin responsibilities but assume you would be entrusting a properly qualified professional tax adviser/solicitor to do it.
 

Q. PR - will they need to be qualified / authorised by regulator?

A. Personal representatives are the executors/administrators of the estate, thereare no qualification / authorisation requirements. Hopefully, they will not DIY and seek appropriate professional help that is qualified. 
 

Q. Penalties if info not provided within timeline.

A. There do not appear to be any specific penalties and the existing framework is in play
 

Q. I appreciate it is not high on The Pru's agenda, but what about illiquid SIPPs/SSASs where most of the value is in commercial property? Will the same timelines apply for payment of the IHT?

The same payments deadlines applies, which is the crux of the liquidity concern for property-only schemes. HMRC has acknowledged the issue. Perhaps speak to your friendly SIPP/SSAS account manager for a specialists view.
 

Q. When do you anticipate an M&G Flexible Reversionary Trust will be available?

A. With a bit of luck a Christmas present or maybe a happy new year present. It’s too early to tell, but we want it to be excellent so we’ll only do it when we are happy with it.
 

Q. Do you think there are any obvious 'quick wins' clients / advisers could be looking at before April 2027? Appreciate scenarios will vary.

A. We don't think there are any quick wins in this area per se but there is the usual things of preparing what your advice policy might be, reviewing nominations, identifying impacted clients might all be time well spent. Tax free “red money” is a good starting place.
 

Q. When calculating the IHT Liability for the Personal Representatives would you recommend that be completed by an Accountant, to avoid Financial Planners being liable for any Taxation errors on the liability amount being calculated?

A. We would recommend that financial advisers work with appropriate tax professionals to do the necessary calculations and file the necessary returns.

We do not see an issue with advisers performing the calculations to aid modelling and financial planning for clients. Likewise, doing calculations for people to understand the order of magnitude of things with an understanding that the tax professional will be doing the official numbers isn't a problem.