Operator: Good day and welcome to the Scottish Widows MasterClass Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr Simon Harris. Please go ahead, sir.
Simon Harris: Thank you very much, Claire. Good morning, everybody, and welcome to the latest Scottish Widows TechTalk MasterClass. In today’s presentation, Chris and Tom, from the Scottish Widows Financial Planning Team, will be looking at pension death benefits and inheritance tax. When the changes were introduced to pension death benefit rules at the same time as pension freedoms, it very quickly became apparent with the significant income and inheritance tax advantages afforded to defined contribution schemes.
Additionally, changes to the definition of beneficiaries also meant that any income paid via flexi-access drawdown can be paid to virtually any beneficiary not just the dependant, often tax-free. In addition, beneficiaries are able to pass on any residual funds on their death to their beneficiaries. This succession planning opportunity is now well known and is a key element of pension planning and indeed often used as one of the factors considered when advising on defined benefits. This can also be the case with pension switching where the existing plan may not offer beneficiaries the full flexibility on death of the member. Taxation benefits, however, rely on them being paid at the discretion of the scheme administrator. The member is able to complete a nomination of beneficiaries, but this can only be to offer indication to the administrator of beneficiaries and cannot be binding. However, there exists a potential challenge to the IHT-free status of the payment of death benefits which can occur when the member dies within two years of a transfer and at the time of the transfer was in ill health.
So, today, Chris and Tom will review the current position regarding inheritance tax on death benefits, reviewing a recent case where the tax-free status of the pension death benefits were challenged on the death of the member and the impact of this case. They will also look at planning opportunities around these benefits. As with other pension areas, the Scottish Widows Financial Planning Team offers a great deal of support in this and other areas. And following the presentation today, Tom will be letting you know where you can find more information.
Today’s presentation is scheduled to last for about 30 minutes following which there will be time for questions. You can submit your questions online via the Ask a Question box on-screen. A recording of today’s presentation will also be made available on the Scottish Widows Advisor Extranet should you wish to review the content again. CPD certificates will also be issued. At this time, I will now hand you over to Tom to start today’s presentation.
Thomas Coughlan: Thank you, Simon. Good morning, everyone. There have been many changes in recent years to pensions: auto enrolment, freedom and choice, and more recently DB transfers. Also, there have been a lot of political changes over the last couple of years as well. And with all that going on, it’s very easy to focus just on the headlines and forget other areas that perhaps haven’t changed too much recently. And IHT and pensions is one of those areas. And is a very big factor as far as pension planning goes. However, if you get it right, no one really notices. However, if you get it wrong, then it can of leads to a sizeable tax bill.
So, first of all, it’s worth reminding you why IHT is an issue for many people; inflated property values over the last couple of decades, and also a frozen nil-rate band have drawn a lot of people into IHT who weren’t previously. And, so, those people should be drawn towards pension planning as pension planning can be highly tax efficient if done the right way – or IHT efficient, rather – but, as I said, a tax liability can still arise. That’s what we’re going to cover today. So, we’ll start with just the fundamental IHT rules and hopefully throughout the presentation we’ll highlight where the pension IHT rules differ from the standard rules.
We’ll also look at the three main scenarios where an IHT liability can arise during lifetime in respect of the pension. So, there are contributions, assignments of death benefits and transfers between schemes. The latter of those was covered in a recent case, the Staveley case, which got a reasonable amount of press coverage. So, we’ll review that and then we’ll look at some of the more recent changes to pension benefits, beneficiary drawdown, and also the other recent changes that came in 2015, which have changed the way pensions can be used for IHT planning. And then as usual, at the end we’ll have time for any questions you may have. So, now I’m going to hand over to Chris to look at the IHT rules.
Chris Jones: Thanks, Tom. Good morning, everyone. So, we’ll go over a quick review, a lot of the IHT rules generally. They are made up of non-exempt assets plus any transfers made in seven years. Up to the nil rate band is charged at 0%, the current nil rate band is £325,000. Above the nil rate band is charged at 40% or it can be reduced to 36% where at least 10% of the estate is given to charity. So, we show a little example here, someone has made a £100,000 gift in their lifetime, the rest of their estate is £300,000; the two added together: £400,000. That’s £75,000 over the nil rate band, that’s what is taxed at 40%, that’s £30,000. The estate suffers the tax, because the PET was made first rather than the estate.
So, what constitutes a loss to the estate Here we have the relevant sections of the legislation. Firstly, there needs to be a transfer of value. This involves any transaction that reduces the value of the relevant estate. Of course, this can cover pretty much all expenditure. So, we have to consider the next relevant part of the section, Section 10. This says it does not class as a transfer of value if, using the technical term, there is no intent to offer to confer any gratuitous benefit. In other words, there was no intent to make a gift for which nothing is received. This section excludes any transaction that is not a gift. The usual legislative double negative means that any gift does count as a loss to the estate and can be included for IHT.
So, transfers of value that aren’t exempt, any gift to a spouse is one that is exempt, can be subject to IHT if there is an intent to reduce the value of the estate. Here we have a couple of examples. On the left, we have the example of a gift of cash or property to a child. Clearly, there is an intent to make a gift to reduce the value of the estate. This may be added back into the estate in the event of death. Whereas on the right, the payment to an ex-spouse under a divorce order, there was no gift element and this wouldn’t be added back in.
Tom is going to show you now how all this relates to pensions.
Thomas Coughlan: Okay. Thank you, Chris. We’ll come back to the issue of intent and how that impacts on IHT and pensions. For now, we’ll just look at pensions death benefits when they are paid on death. So, generally, they are free of inheritance tax; however, that does assume they are not payable to the estate. So, they should be paid outside of the estate of the member and they should be paid to a beneficiary rather than back to their estate. However, in some cases, they are paid to the estate, which does undermine the IHT structure in a lot of pension schemes since some schemes don’t have a trust with death benefits, or in some cases there is a trust with death benefits but for whatever reason the trustees of the pension scheme pay those to the estate. So, that can be easily avoided with some forward-planning. However, if the estate is left to an exempt beneficiary, such as the spouse or a charity, then it may not matter that the death benefits are paid to the estate. Equally, if a member doesn’t have an IHT issue, then, again, it might not be a problem that the death benefits are paid to the estate. But in most circumstances, that should be avoided. So, one way of planning ahead for that is by choosing a scheme that pays death benefits under the discretionary rule. So, most personal pensions will operate on that basis. There is the discretionary trust with death benefits, and the trustees can decide who they pay that to and the member just completes a nomination form which is a non-binding nomination. Not all schemes have a discretionary rule, but nonetheless they do have a trust for the death benefits. So, for example, Nest and NHS, they allow you to nominate a recipient but there’s no discretion, whoever is nominated will receive those death benefits. But in any case, it is still IHT-efficient because they are not being paid to the estate. And some schemes don’t have a trust at all; so, you have to execute a trust over the death benefits to avoid them – to avoid the default position which would be them being paid to the estate.
So, it’s usually quite straightforward to ensure that if there is not going to be an IHT issue, then the death benefits are paid elsewhere. Clients should just check how the death benefit structure of that scheme works. If they are payable under a discretionary rule, then that’s usually okay, but whatever nominations they need to complete, they should. And if they have an older style scheme, such as a Section 226, then they might need to be a little bit more careful. And the key is always, with IHT, to take action as early as possible and when the member is in good health.
So, that’s the first stage of pension and IHT, ensuring the death benefits aren’t paid to the estate. However, outside of that, there are a handful of situations where pensions can be subject to IHT, and they are the three listed at the bottom of the slide there. So, contributions, assignments of the death benefits and transfers between schemes. If any of those occur when the death benefits have a value - usually when the member is in ill health - then there can be an IHT issue.
Okay. So, just going back to what Chris was saying at the start. So, for there to be an IHT transfer of value, there has to be a reduction in the value of the estate. There also has to be some intent on the part of the member to actually reduce their IHT bill. So, a pension contribution does reduce the cash value of the estate. So, is it a transfer of value for IHT purposes? The general answer is no, particularly where the member is in good health and the answer will be no. So, the example on the left-hand side shows the £160,000 payment from the estate to the pension. So, the cash value has reduced and that money has increased the value of the pension fund. But in return the member has received a more secure retirement; a better retirement benefit fund which they will be entitled to in the future. So, they haven’t given something away, they’re not trying to reduce the value of their estate. That cash is being given away because they will be receiving a retirement from the pension. So, there’s no transfer for IHT purposes.
However, the answer is slightly different if the member is in serious ill health. However, it’s not a definite yes, it’s just a ‘maybe’. So, the top half of the diagram is the same, £160,000 in cash leaves the estate, but because the member has a limited life expectancy, instead of increasing their retirement fund, what they’re doing is increasing their death benefits. So, there’s increase in the future retirement benefits that they’re receiving. So, what they’ve essentially done is moved £160,000 outside of the estate. There may not necessarily be tax consequences, however, because just a reduction in the value of the estate isn’t enough, there has to be some intent on the part of the member to reduce their estate. And the approach that HMRC use generally is that if the member is aware that they’re in serious ill health and they make the contribution, then they will include it in their estate. If the member is not aware, then generally it will be excluded because they couldn’t have been said to have tried to reduce their estate for IHT purposes. And just to clarify, it is generally new or increased contributions the HMRC will consider. So, an existing sequence of contributions, say £40,000 every year that goes back a number of years, that would generally be ignored even if the member is ill health and they make the most recent contribution because they haven’t changed the level of contribution: they haven’t taken any action following being made aware of serious ill health.
Okay. So, that’s the first of those three scenarios. Assignments are also quite similar in the way that the rules are applied as well. So, whilst the member is in good health, there is not a transfer of value, as we said on the previous slide, there is no reduction in the value of the estate as far as contributions are concerned because they are offset by the increase in retirement benefits, so the estate doesn’t lose value. In terms of assignments of death benefits, it’s slightly different because there’s nothing leaving the estate because the death benefits whilst in good health have only a nominal value - there’s nothing leaving the estate for IHT purposes.
In serious ill health for both, then there could be a transfer of value for IHT purposes. And what HMRC do is they investigate contributions and assignments are made within two years of death. And the two-year rule is just an arbitrary cut-off the HMRC use to try and highlight which contributions or assignments were more likely to be made during serious ill health; it’s not a fixed cut-off. Contributions made more than two years before death can be looked at, and contributions within two years of death aren’t always an IHT issue. As, again – as I said previously, if the member hasn’t been aware of their serious ill health for HMRC to be able to prove some intent. But contributions and assignments are quite straightforward in that sense.
In terms of the administration, then the executors of the estate will have to fill out the IHT and pensions form, and that is IHT 409. That is a form dedicated just to pension death benefits on death. And as the form says, they must fill out details of contributions and assignments that were made within two years of death. And HMRC will then use that to investigate the client circumstances, essentially just trying to establish if the member was aware of their ill health at the time they did those things. If HMRC do try and include that in the estate, then the executors can usually appeal. And there have been a number of cases where that decision by HRMC has been overturned.
So, the screen print on the slide just shows that from there as the contributions go into section 22 and the assignments on the bottom right-hand side, question 21, I think. I can’t quite read the number on this slide.
Okay, just some examples then, just to illustrate that. So, Peter, who is terminally ill, pays a £160,000 contribution to his personal pension. He hasn’t paid anything in previous years. So, it is his first contribution in recent times and he dies within five/six months later. Paul similarly pays the same amount, again a new contribution, and a month later he is advised he has less than a year to live and dies 11 months later. So, they’re very similar scenarios. However, Paul will probably get the exemption from inheritance tax because he made the contribution before he was advised of a terminal illness, whereas Peter on the other hand made that contribution after he was made aware.
Okay. On to transfers. The transfers are a little bit more complicated. There are similar rules as applied for contributions and assignments. However, it is less clear why there should be a transfer value in this case. The death benefits would probably have been held under a discretionary trust under the transference scheme and then moved to a discretionary trust under the receiving scheme. So, it’s not entirely clear why there is a transfer of value, why there is a loss to the estate. However, HMRC’s view is that during the transfer process, the right to decide who receives those death benefits comes back into the estate and that is what is being given away. So, in good health, the death benefits have no value; so, it doesn’t matter, there is nothing to give away in terms of value for inheritance purposes. However, in serious ill health, again, there could be a transfer of value for IHT purposes. And it’s the same two-year rule, and it’s the same rules around intent or awareness of ill health.
And this approach was tested to some extent in a recent case, which was the Staveley case. So, this case centred around a disputed IHT charge following a pension transfer. So, a brief history of the case is that Mr and Mrs Staveley owned a company to which was attached an executive pension plan. After they got divorced, her benefits were transferred to a section 32. However, under pre-A day rules, at the time it was possible that excess benefits in section 32 could’ve been returned to the previous employer and that just happened to be her ex-husband’s company. So, taking advantage of Pre – A day changes, she transferred from the section 32 to a personal pension, and the intention there was to fully sever the link between her pension benefits and her ex-husband’s company. But she was in ill health at the time and she died shortly afterwards. So, she ticked all the boxes, she died within two years, she made a transfer and it was at a time when she was aware of ill health. So, HMRC tried to include a value for those death benefits in her estate but the Staveley family took the case to the first tier tribunal and they won the case. And HMRC then appealed to the higher – the upper tax tribunal, but they also found in favour of Mrs Staveley. So, there was no doubt that there was a transfer of value because the death benefits under the section 32 were in her estate and she then gave them away. But the intent of that transfer was to ensure that her ex-husband didn’t receive any of the pension benefits. So, there was no intent to reduce the value of the estates for inheritance tax purposes. The HMRC decision was overturned on that one.
There’s also a helpful comment during the case which was that transfer from a personal pension to another personal pension for purely commercial reasons shouldn’t be considered a transfer of value for IHT purposes. And the example of that commercial reason was to get a better rate of return. So, if there is a genuine reason for transfer, even whilst a member is in ill health, then clients generally should be okay. But IFAs should try and document as best they can in the fact find, etc., so they amass some evidence so that they can argue back with HMRC should they try and include that value in their estate.
Okay, I’m now going to handover to Chris.
Chris Jones: As Tom has described, if benefits are subject to a discretion rule, in most cases they will be free from IHT. However, there are other things that need to be considered. Firstly, the lifetime allowance test. This applies to some benefits that haven’t already been tested. This will mainly be uncrystallised money purchase funds. Funds that are already in drawdown will have already been tested and won’t face a second test. And post-75 funds will already have been tested.
Secondly, income tax on the beneficiary. While pre-75 cases are paid out free of tax, income tax applies to all benefits on post-75 cases. Also benefits and payments in place before April 2015 are subject to income tax. The change didn’t apply retrospectively. The third thing is payments must be paid out within two years to be free of the income tax. Most scheme administrators will aim to ensure this happens. If not, they are taxed at the beneficiary’s rates regardless of age at death.
Death benefits can be paid as a lump sum. And previously this was a very popular and attractive option. However, this takes the benefit outside of the tax efficient environment of the pension for income tax and CGT and will place it directly into the beneficiary’s estate for IHT.
So, a more attractive option since April 15 has been beneficiaries drawdown. There were two changes that made it more attractive; firstly, benefits are free from tax for all pre-75 cases; secondly, the rules were changed to allow the member to nominate anyone to receive drawdown. Previously, drawdown was only available to dependents. The fund can then remain invested within the pension fund outside both the member and the beneficiary’s estate. The beneficiary can take the funds as and when they need them either free of tax or at a marginal rate, depending on the age of the member at death. This can make beneficiary’s drawdown an attractive IHT planning option. It also allows the beneficiary to pass on any remaining funds to their chosen beneficiary. The advantage, of course, will be removed if all the funds are withdrawn and brought back into the beneficiary’s estate. Where there is an LTA charge, this option is particularly attractive. There will be a 25% lifetime allowance charge rather than a 55% charge on the lump sum. Of course, even if they want a lump sum, they can just move into drawdown, take that 25% charge and then withdraw the rest of the funds as the lump sum anyway.
So, benefits not paid from a discretionary trust may be IHT-inefficient. Some schemes do not hold benefits in a discretionary trust and two big examples of that are the NEST scheme and the NHS scheme. However, they do allow the member to nominate a beneficiary. A member should nominate a beneficiary, but this could be a transfer value for IHT purposes, the same, as Tom was saying previously, if the member was in ill health at that time. If they don’t make a nomination, the death benefits will be paid into the estate. Some older schemes, typically section 226 contracts, pay death benefits directly to the estate under the terms of the contract. Where IHT is a concern, a trust can be wrapped around the whole contract to direct death benefits elsewhere. Again, this will be a transfer of value and, again, if they are in ill health, they could have IHT consequences.
Third point is where schemes pay death benefits under death discretionary rule. It should be actually but often clients want certainty and they try to do a nomination to create that certainty. They have to be careful in doing so they don’t remove that discretion. The discretion is required to get that IHT benefit.
The nomination of the beneficiary should be kept up to date to ensure the scheme administrator know who they want to benefit. This needs to take account of the legislation around who can receive beneficiary drawdown. And there’s a slight quirk in the legislation here. If there are dependents and/or nominees, the scheme can only set up beneficiary drawdown for those individuals. However, if there are no dependents or no nominees, the scheme can set up beneficiary drawdown for anyone. That only affects drawdown regardless of the nominations, schemes can pay lump sum death benefits to anyone. So, any beneficiary that the member would like to receive beneficiary drawdown that is not a dependent, and the most obvious of those would be an adult child, should be nominated. And one solution for this would be to say do a 98%, 1%, 1%; 98% to your spouse, 1% to your child and 1% to another child. This has the benefit that if you didn’t update your nomination in the event of your spouse dying before you, then your child’s name is already on that form and it means that the scheme can pay beneficiary drawdown to that child.
That’s all the technical content. If you have any questions, please do start asking them on the online system. While we’re waiting for those, Tom is going to give us a reminder of our other support materials.
Thomas Coughlan: Thanks, Chris. I hope that was useful. I’m just going to briefly summarise some of the technical resources that we have which covers IHT and pensions and a variety of other topics as well. We do have a technical guide to pensions on IHT, which I will direct you to on the next page. And we have a spotlight guide to pensions and IHT, which is coming very shortly as well which is a more detailed document than perhaps our TechTalk articles might be.
Also, the inheritance tax manual HRMC have on their website is also a very useful resource for questions on this topic as well. Our most recent edition of TechTalk is on the website, the link is at the top there, although you don’t have to type that in, you can click through. There’s a slightly reformatted edition and we’ve got a good number of articles in there this month. Just to pick a few, we have an article on pensions and divorce, pension scams, which is very topical at the moment, and also small pension payments as well. If you do want to look at our archive of TechTalk as well, then that is on the website. And we also have a TechTalk index; and, again, the link is at the bottom there, which allow you to locate any articles you can. We have one that is in alphabetical order and another by subject, allowing you to find whichever article you require.
Just to go through some of our other tools as well. Some of these are going to become very useful in the next few months as we near the end of the tax year. So, we have a carry forward calculator that also includes the tapered annual allowance as well, allowing you to work on your maximum carry forward for high earners. We also have a tapered annual allowance calculator itself which allows you to work out your client’s adjusted income and therefore their tapered annual allowance for their current year. And we have a tax relief calculator as well allowing you to work out the exact amount of tax relief that your clients will get on their personal contributions. And for owner-managed businesses, we have a salary dividends and pensions calculator which allows you to work out the most tax-efficient mix of salary dividends and pensions for a given scenario. Retirement planning support material, we have our essentials guide which are basic guides covering the number of topics. We have our technical guidance of the pensions and IHT, technical guidance within that section. Those have a range of case studies and also quarterly spotlights. And that is where our forthcoming detailed article on pensions and IHT can be found – and then retirement planning articles just contains our history of TechTalk articles in PDF form. And we have our MasterClass series as well, that is on the financial planning side. I think it’s under the advisor hub. So, all of our recent MasterClasses are on there. The last six are just on the slide there. The recording and the slides and the transcripts are all contained on this. So, there’s a good range of resources for you to refer to.
Okay. We’ll now see what questions have come through on the webpage.
Chris Jones: Yeah, just start with the usual one. If Tom hasn’t covered it already, just to reiterate; we won’t send out copies of the slides. We’ll send out a link to the recording and the slides which will be held on the website. You can also listen again on demand in the meantime. Slides will probably be up on the website next week, but you should receive an email at that point with the details
Thomas Coughlan: Okay, there is a question here, one for you, Chris. ‘Is it necessary to have all beneficiaries named on the expression of wishes form to enable them to benefit from the pension fund and death? Standard Life are suggesting that anyone you wish to inherit the fund and survivor drawdown be named with a 1% hold, which I think that was the last point you covered in the slides.’
Chris Jones: Yeah, that’s right. Hopefully I covered that in the slide – sorry, in the presentation. But yes, if they’re not a dependent, then they need to be named in order to have beneficiary’s drawdown. As I say, oddly, if nobody is named and there’s no dependent, then you wouldn’t need to be named; but in most cases there will be a dependent. So, if you have a spouse but you want to give your fund to an adult child, that name needs to be on the form to get drawdown; but to be clear, not lump sum benefits.
Thomas Coughlan: Okay, there’s another question here. I think I’ll take this one. ‘What is the best way to identify whether an existing pension arrangement would form part of the client’s estate.’ There’s no black or white answer, really, it’s just a matter of looking at the pension scheme you have. If it’s a recent personal pension, then the chances are there’s a discretionary trust and you just wanted a nomination of beneficiary. As Chris mentioned, if there’s NEST or NHS, for example, then there might not be a discretionary rule, but you just have to nominate who is to receive those death benefits. What I would be cautious of is older styled schemes which weren’t necessarily set up to be IHT-efficient and the default position might be to pay the death benefits to the estate. So, the only thing you can really do is to look at the scheme you have. If you’re unsure, then speak to the scheme direct and just find out exactly how they pay those death benefits. But it’s always best to take action as early as possible rather than wait until the member is perhaps in ill health when you’ve then got a possible IHT issue.
Chris Jones: Take one from Nigel. ‘Can a beneficiary access beneficiary drawdown effectively before age 55?’ Yes, they can at any age. So, there’s no age restriction. So, yeah, another benefit of it, they can take it at any age. And if the members died under 75, it will be tax-free.
Thomas Coughlan: Yeah, there’s another one here for me. So, ‘if death occurs within two years of a pension transfer where the member is in ill health and prior to the transfer the joint estate is less than 325, will the transfer be added back to the estate?’ The answer is generally there is a good chance that HMRC will try to include that in the estate but they do have to show them the member was aware of their ill health at the time they transferred and that there was no other genuine commercial reason for the transfer. So, that could be an issue, but it’s difficult to give a guaranteed answer. Also the fact that the beneficiary was the spouse might not matter if you don’t necessarily get the spouse’s exemption in that case because the payment may have come from the discretionary trust. So, there could be an issue there but, apologies, it’s not easy to give a certain answer on that, I’m afraid.
Okay. There’s another question here about ‘can you clarify the issue of IHT on NEST pensions? My understanding is that they are not IHT exempt and you’re suggesting that they are.’ Yes, so there is no discretionary rule. What you will do is you will fill out any nomination and whoever you nominate will receive the death benefit. So, if you wrote ‘my estate’ on that nomination form, then the death benefits will be paid to your estate. However, if you do nominate another beneficiary, the spouse or the child, then they should be payable outside of your estate. But where there could be an IHT issue is if you complete that nomination within two years of death whilst you’re in ill health. So, that is more of the issue. So, they can be IHT-efficient but, just going back to my earlier point, you’ve got to fill that nomination as early as possible rather than waiting until the member is in ill health when HMRC will try and include a value for those death benefits in your estates, and because the default is within the estate until you fill out that nomination form.
Chris Jones: Okay. Thank you. One here, ‘What happens to pensions if a post-75 member dies?’ So if it’s still invested post-75, yeah, they can still have the same options, beneficiary drawdown or a lump sum. The only difference is it’s then taxed at the beneficiary’s marginal rate of income tax. So, yeah, a little bit of planning about who you want to pass you funds onto at that point and they’re tax positioned to see whether it’s better to take benefits yourself or leave them and pass it on to a beneficiary.
Got one here. ‘A husband dies pre-75, leaves £500,000 to his wife, wife wants to draw gradually and leave remaining pension on second death to children.’ Yes, it’s exactly the sort of planning that’s available now.
‘Are the gradual withdrawals all tax-free for the wife?’ Yes, they are. There’s no requirement to take a lump sum. She can access it as and when she wants and all withdrawals will be free of tax.
Thomas Coughlan: Okay. There’s been a questions here, ‘If you simply want someone to be considered, is it possible to use a 0% nomination as opposed to an arbitrary 1%?’ Probably not. If you are going to put an individual on the form, you probably want to put 1% rather than say put a name on the nomination only to say they get nothing probably won’t work. However, there’s no harm in the 1%. That does ensure that they’re named; but by leaving perhaps 98% to the spouse, it shows the trustee that that is the person who should be the primary beneficiary. So, I think 1% is a better approach to a 0%.
Chris Jones: Okay. We’ll take one more. If we haven’t covered your question, we’ll go through them later and get back to you individually. But last question. ‘Schemes that pay out to estate, is it possible to state a beneficiary in a will or does there have to be a trust?’ If the fund is paid out into the estate, it will just be accumulated with all the other assets within the estate. And, yes, the will can direct that fund to whoever they want then. There’s no need for a trust at that point.
Thomas Coughlan: Yes, so that just comes down to whether they have an IHT issue or not. If they don’t have an IHT issue or everything is being left to the exempt beneficiary, then, yeah, directing the death benefit to the estate and then letting the will deal with it night be the best approach.
Simon Harris: Okay. Thank you for all those questions. As Chris was saying, any questions we haven’t got around to today, we’ll make sure we get back to you with a response. As we’ve seen in today’s presentation, pension death benefits and beneficiary review is now an integral element of pension planning. Reviewing your client’s plans to be in the best position to support their beneficiaries and dependents in the event of their death is clearly very important. It does take for planning and it’s important you’re aware of the requirements to maintain the best position should the unfortunate occur. IHT on pension death benefits can present some challenges. However, I hope the presentation today has offered some greater clarity. Please make use of the material available from the financial planning team, which Tom highlighted, and speak to your Scottish Widow’s contact about how our proposition can help with the planning ideas Chris and Tom have covered today.
As a reminder, a recording of today’s session will be placed on the advisor extranet for further review and, indeed, if you wish to review any of the other recordings from previous MasterClasses. As mentioned in my introduction, CPD certificates will be issued.
So, finally, my thanks to Chris and Tom for taking us through the slides today. And thank you for joining. And that concludes today’s presentation.
Operator: Thank you. Ladies and gentlemen, that will conclude today’s conference call. Thank you for your participation today. You may now disconnect.