Consumers with large portfolios of tax-free savings may be unaware of their inheritance tax (IHT) liabilities, Aegon Scottish Equitable warns.
The firm says advisers should warn clients that, although ISAs and PEPs are free of income and capital gains tax, they do form part of the estate for IHT on death.
It points out that, should a consumer’s estate be valued above £312,000 – the nil rate band for 2008/9 – they will be taxed at 40% on assets beyond this amount.
Aegon research suggests a client could have amassed more than £360,000 in a PEP or ISA since that type of investment was launched over 20 years ago.
Margaret Jago, technical manager at Aegon Scottish Equitable, says: “Financial advisers have a central role to play here in calculating the value of their clients portfolio and advising them accordingly.
“Even when we consider all of the negative press surrounding potential drops in house prices, latest figures from the Halifax tell us the average house in the UK stands at just over £184,000 and in Greater London the price is over £300,000 with many individuals having other investments on top of that.”
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