Pensions brought into the scope of IHT

[Oldtramp]

I am trying to comprehend the way pensions have been brought into the scope of IHT in today's budget.

Succinctly, I am a UK citizen, UK domiciled, and have a wife who is non-domiciled. She, for family reasons, is having to spend much of her time outside the UK.

I understand that inter-spousal transfers are not IHT-exempt in my position

I have a DB (NHS) pension, with a 50% widow's pension. Assuming I predecease my wife will her widow's pension be reduced on some notional value basis?

Separately, I have a DC pension which I have assigned to pass to my wife on my death. The likely transfer value exceeds IHT limit once added to other property that she would inherit. I understand this now creates a tax liability But, what happens if I convert the pension fund to a joint-life annuity? Does that incur a tax liability on my death?

I believe (rightly or otherwise) that any problem might be resolved by my wife simply electing to accept UK domicile and notifying HMRC of this. Correct me if i am wrong! Is there any time limit prior to my demise that this must be done?

[AGoodman]

I'm not sure on the details but yes, your wife can elect into being taxed as domiciled here (presumably that will also change to "long term resident" - although I haven't seen whether that is included in the new draft legislation).

She can make the election retrospectively after your death so no action is necessary now.