Firstly, as with other actions in the two years before death, if the individual did not know that they were ill at the point the contributions were paid, IHT should not be a problem.

Secondly, if the contributions are simply a continuation of a pattern of payments that had already been in existence for two years, the contributions won’t create an IHT issue.

Problems may be encountered when neither of the above is true – so where the member was in ill health when the contributions were paid and the payments did not follow a contribution pattern that had been in existence for two years.  

Both member and employer contributions are potentially problematic here. The latter because of the possibility that the individual had some sort of involvement in, or control over, their remuneration being provided using pension contributions rather than salary.

Questions 25 to 42 – Alternatively secured pension funds and dependant’s pension funds

These sections will only be relevant where the date of death was on or before 5 April 2011, so have not been covered.

Although the pensions held by most clients won’t be relevant for IHT purposes, it’s important that the IHT409 is fully completed after death.  

Of even more importance is giving consideration, particularly if a client sadly becomes terminally ill, to the fact that pensions are not completely exempt from IHT and that actions such as transferring a pension or making sizeable contributions can create unwanted tax liabilities.

Gareth James is head of policy at AJ Bell