Investment companies call on chancellor to ditch inheritance tax raid on pensions.
Investment companies have called on the chancellor to ditch budget plans to apply inheritance tax on undrawn pensions.
A letter penned by the chief executives of AJ Bell, Hargreaves Lansdown, Interactive Investor and Quilter, which collectively manage £430bn of investments for UK customers, says there is “concern” about the proposals put forward by Rachel Reeves.
They warn that bringing all pensions into estates for inheritance tax will “lead to substantial delays paying money to beneficiaries on death and cause distress for bereaved families”.
Pointing to justice ministry data, which shows the number of probate cases taking over a year to be granted has risen by 134% in the past three years, the bosses argue the chancellor’s proposals will “worsen” this statistic.
They add legal representatives tasked with collecting information across multiple pension schemes will face a “greater burden” and in due course this will “compound an already difficult situation” for grieving families.
“Rather than pressing ahead with this flawed and potentially damaging approach, we urge the government to reconsider the proposals and work with the pensions industry to agree a simpler method,” the letter reads.
Currently the value of most individuals’ undrawn pensions is not subject to inheritance tax on death.
But from April 2027, any unused pension funds and death benefits payable from a pension will be brought into the inheritance tax net under plans put forward by Reeves – but it’s not entirely clear how this will work in practice.
To find out more about how this will affect your company and employees please contact your KKVMS advisor.