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Retirement and Investment Solution’s A-Z Guide to Financial Planning


Pilot Trusts

The Challenge

Many of us have death-in-service cover through our employer or death benefits through a pension scheme. You will probably have completed a nomination form to ensure the money goes to your spouse or partner.

The nomination form works perfectly to ensure that the proceeds of the payment pass directly to your spouse or partner, quickly, without any probate delays and typically free from any Inheritance Tax. However, have you thought about the tax implications of this in the longer term?

Once your spouse or partner receives the lump sum, the money is added to the value of their estate and as a result, may be liable to 40% Inheritance Tax on their death, significantly reducing the overall amount inherited by the next generation.

The Solution

Fortunately, there is a simple way to avoid this problem. Ask your pension scheme provider to pay your death benefits into a special type of trust, instead of directly to your spouse or partner. This is known as a Pilot Trust.

Established during your lifetime with a nominal sum, it then lies dormant until your pension death benefits are added.

Your spouse or partner can still benefit immediately from the lump sum in the trust, but because it is not treated as their own money when they die, no Inheritance Tax will be deducted.


Table 2

What should I do next?

Contact Retirement and Investment Solutions on 01489 878300 or email This email address is being protected from spambots. You need JavaScript enabled to view it. to explore if you and your family can benefit from a Pilot Trust.




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Hampshire, PO7 7SE

T: 01489 878300
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