• Grieving family members inheriting a loved one’s unspent pensions may face serious delays and additional costs from April 2027 onwards.
• However, ii welcomes the confirmation that death in service benefits and dependant’s pensions under defined benefit schemes are to be excluded from calculation.
Commenting, Craig Rickman, pensions expert, interactive investor, says: “It’s hugely disappointing the government is pushing on with plans to bring pensions into the inheritance tax net by 2027, despite being warned about considerable problems with the proposals. Alternative solutions were presented to the government at no detriment to its fiscal targets, which would’ve eased the burden on surviving loved ones. It's a real shame these have not been taken on board.
“While confirmation that death-in-service benefits won’t fall under the scope of IHT is a welcome development, the proposals entering draft legislation remain fraught with issues, risking lengthy probate delays and additional costs, which may cause unnecessary distress to grieving family members.
“Consumers are already altering their behaviour ahead of April 2027, in some cases making pension withdrawals sooner than previously intended in fear of loved ones being hit with exorbitant tax bills and facing an administrative maelstrom. This could not only lead to poorer outcomes in retirement, but damage trust and confidence in a pension system that is already on shaky ground. Furthermore, savers might be extracting and passing on money from their pensions that they need to meet future financial responsibilities, such as to cover the cost of care.”
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