In a written statement released this week, UK Paymaster General, Dawn Primarolo revealed that the government will close a 'loophole' in new pension regulations.
The provision in the new rules, set to come into force on April 6, would have allowed pensioners over the age of 75 to transfer property to their children free from inheritance tax by putting it into alternatively secured pensions (ASPs).
From the start of the new tax year, ASPs will allow pension fund holders to keep their funds intact rather than being obliged to buy an annuity at 75. As the regulations stood prior to the government's closure of the loophole, this would have meant that the property could then be transferred free from IHT to self-invested pensions held by their children with the same provider.
Ms Primarolo warned those planning to take advantage of the loophole in the new laws, however, that ASPs "were not meant as a vehicle for inter-generational transfers by scheme members generally, and the government will continue to monitor the situation to ensure that they are not being used for avoidance".
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