While the technical details are still under consultation, the government seems committed to applying IHT to pensions.
Discouraging pensions as wealth transfer tools is reasonable, as they are meant to fund retirement rather than facilitate tax-free inheritance.
Aligning pension policies with this purpose ensures tax benefits support retirees’ living costs, reducing reliance on public welfare rather than enabling untaxed wealth transfers.
A simpler solution would be to apply income tax to all pension death benefits, regardless of the member’s age at death.
Including pensions within the scope of IHT could create major complications, leading to delays in distributing funds as administrators and personal representatives navigate complex tax calculations.
These delays could cause financial uncertainty for beneficiaries during a critical time. Additionally, the increased administrative burden would drive up costs for pension providers, which would likely be passed on to savers.
This added complexity risks making pensions less efficient and appealing, potentially discouraging individuals from investing in their retirement savings.
