Inheritance Tax Act 1984 section 12A

Pension drawdown fund not used up: no deemed disposition

Section 12A ensures that a person who leaves unspent pension drawdown funds at death is not treated as having made a transfer of value for inheritance tax purposes simply by not drawing down the entire fund during their lifetime.

• Where a person has a pension drawdown fund and does not use it up before death, the normal rule that treats an omission increasing another's estate as a transfer of value does not apply.
• Drawdown funds covered include member's, dependant's, nominee's and successor's drawdown pension funds and flexi-access drawdown funds held under money purchase arrangements in registered pension schemes.
• The protection also extends to equivalent drawdown funds held under qualifying non-UK pension schemes and certain section 615(3) schemes that are not registered pension schemes.
• This provision was introduced by Finance Act 2016 and removes the risk that simply failing to withdraw pension savings during one's lifetime could give rise to an inheritance tax charge.

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