As you may be aware, the Chancellor in her last budget speech announced that unused pension funds would be brought into the scope of Inheritance Tax (IHT) from April 2027. There is a public consultation on this proposal, specifically to cover the administrative arrangements to enable collection of the IHT due on the death of a pensioner, but you can no doubt expand your explanations as to why this is a most iniquitous proposal.
I have already submitted a personal response to HMRC which is here: https://www.roliscon.com/_files/ugd/8ec181_315301fc03f24c828a7eceea00349a23.pdf . You are welcome to copy it. There is a link to the consultation in there. Please do respond to it.
As was said in an article in Investors Chronicle, “IHT on pensions will be a bureaucratic nightmare for grieving families”. It will inevitably slow down payments to inheritors or beneficiaries and will make for a considerably more complex tax system. Steve Webb, former Pensions Minister, said that bereaved families already face “huge challenges in winding up the financial affairs of a loved one”. This proposal will make their task even harder.
Not only will this proposal create needless work for lawyers and accountants, it will also mean more work for HMRC staff. All of this unproductive work could be avoided if the objective is simply to raise more tax revenue.
It is an ill-thought through proposal which has been rushed forward in the Labour Government’s hurry to raise more tax from the wealthy. It needs a rethink.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
Thanks Roger, I shall be replying also.
I did hear that a number of the public sector were envious of the inheritability of private pensions. The solution is simple, and obvious to a fair mind; the public sector should receive pension rights and pay taxes on exactly the same basis as the private sector whose taxes pay them.
I am still still waiting to hear whether, in addition of up to 40% being taken on death, the inheritor will also pay tax on taking the money. In that is the case the majority of cases the tax would be 64%.
The response should be to immediately stop saving in a pension, start drawing it down a.s.a.p. and hopefully reduce the fund to £0 by the time you die. Your offspring will be better off if you simply put money in index linked gilts.
Can’t see why the inheritor would not pay tax on money withdrawn.