Benefits payable from stand-alone registered group life pension schemes will be exempt from inheritance tax (IHT) changes, the government has clarified.
This aligns with the treatment of retirement benefit schemes that provide death-in-service benefits.
An earlier draft of Clause 63 of the Finance Bill required members to have been actively accruing benefits under a scheme at the time of death to qualify for an exemption.
An amendment to the Bill earlier this month clarified the government’s position on the issue.
Concerns were raised by group risk industry body Griduncertainty could affect as many as eight million people in their potential death benefits.
It noted that while this draft of the clause may suit pension schemes with ongoing retirement benefit accrual, it created uncertainty for more than eight million employees covered by stand-alone death benefit arrangements, who cannot accrue benefits because the scheme is not designed to do so.
Last July, Grid warmly welcomed confirmation that death in service benefits will not be brought under the scope of IHT liabilities.
Necessary changes
Katharine Moxham, spokesperson for Grid (pictured), said: “The draft clause was nonsensical because people who are members of stand-alone registered group life pension schemes simply cannot accrue benefits.
“However, the wording left room for interpretation and caused understandable concern among employers and employees,” Moxham added.
“We are pleased that the government has listened and made the necessary changes to provide clarity and reassurance for our members, employers, and employees and their families.
“At a time when families are dealing with the loss of a loved one, those who have planned ahead to provide financial protection should not face additional inheritance tax on the very benefits intended to support those left behind.
“This is the right decision and reflects what we believe the government intended but had not set out clearly in the earlier version of the Bill.”
