A House of Lords committee will scrutinise current plans to include pensions in inheritance tax calculations.
As part of this process the House of Lords Finance Bill sub-committee has launched a call for evidence, and is inviting responses from the industry as to how these reforms will work in practice.
Announcing this call for evidence the committee says it will look at whether the Government has sufficiently taken into account the impact on pensions schemes and personal representatives.
In July, HMRC published draft Finance Bill legislation, confirming it plans to go ahead with the proposals from April 2027.
The chair of this sub-committee Lord Liddle said: “In its draft finance bill, the Government is proposing a measure to bring unused pension funds and death benefits into the scope of Inheritance Tax. It is also making significant changes to agricultural property and business property reliefs.
“The Finance Bill Sub-Committee’s work does not look at the rates of tax proposed by the Government. Instead, it makes recommendations on how the Government’s tax policy can best be implemented and administered.
“These are important changes. To inform our work we want to hear from as broad a range of people and organisations as possible. If you have a view on any aspect of these proposals, please let us know what you think.”
Written responses have to be submitted by October 7.
There has been significant push back from many in the pensions industry about these plans, with many saying it will create unnecessary complexity and confusion.
AJ Bell head of public policy Rachel Vahey says: “The Lords are turning their scrutiny onto the controversial plans to introduce IHT on unused pensions on death, following a call for evidence launched today.
“Despite a deluge of criticism of their original proposals, the government decided to press ahead, changing the detail to push the responsibility of calculating and paying IHT firmly on the shoulders of personal representatives. But it quickly became apparent the new proposals didn’t resolve any of the complexity; instead, they merely create new problems for bereaved families.
“Hopefully the Lords will be able to see what effect this will have and ask the government to change direction. Bereaved families will face a huge administrative burden, with the government insisting they settle the IHT bill within six months. Many people have complex financial affairs, especially those who die unexpectedly, meaning settling the bill quickly may not be straightforward.
“But it’s not too late. Ministers still have time to see that these proposals are not the best way to achieve their objectives. There are alternative solutions to taxing pensions on death that won’t cause the administrative frustration while still raising the same amount for government coffers.”
