The HM Revenue and Customs has warned that money purchase pension schemes cannot be manipulated to collect lump sums that would escape an inheritance tax bills.
Following some providers comments that, since A-Day, the scheme pension income option under money purchase schemes, could be used to create artificially high lump sums on death that could be passed on to dependents free of inheritance tax, Axa wrote to HM Revenue & Customs for clarification on the issue. The Revenue stated that it would 'expect the scheme pension payable to be commensurate with the level of pension that the fund would secure on the open market', and that they 'would not regard this sort of action to be within the tax rules'.
Our view
Abuse the rules and the intent of the law at your own risk. We are sure HM Revenue and Customs will not be impressed with any pension or financial company that try's to be clever.