A loophole in inheritance tax legislation is to be closed.
At present, small self-administered schemes (a type of pension scheme mainly for executives and directors) are able to pass on pension funds on death having not purchased pension income after age 75 and avoid inheritance tax unlike other private schemes which get caught if you have not taken action by age 75.
This loophole will be closed in an early pre-budget report by the Chancellor, which is expected in October. This will allow the HM Revenue and Customs to rectify the omission.
Our view
This correction would see similar tax charges of 82 per cent applied to small self-administered schemes, which is in line with alternatively secured pensions. We believe that the decision on these changes is virtually irreversible, it will take place and people should not await to see if the changes take place before deciding whether to buy an annuity or not.
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