Suffolk Life has launched a so-called bypass trust for all its SIPPs to aid advisors and investors with estate planning.

Suffolk Life, a UK provider and administrator of self invested personal pension schemes, has launched a so-called bypass trust for all its SIPPs to aid advisors and investors with estate planning.

“Providing a bypass trust will provide a valuable option for those advisers looking beyond a pension as solely a vehicle for an individual’s retirement,” said Greg Kingston, head of marketing and proposition at Suffolk Life.

A bypass trust allows lump sum death benefits payable from a SIPP to be paid to a trust rather than an individual, meaning beneficiaries can access a pension fund without increasing the estate for inheritance tax purposes.

“While pension death benefits are normally paid free of inheritance tax, they may become taxable in the estate of the recipient beneficiary on that beneficiary's death or lifetime transfers, unless an exemption is available at that time,” the Legal & General subsidiary said in a statement.

By nominating the trustees of the bypass trust as the recipient of their pension scheme death benefits, the fund remains accessible without forming part of the beneficiaries' estates for inheritance tax purposes, maximising the amount that passes to the next generation.