Sackers has warned that HMRC’s plan to bring most pension death benefits and unused DC pots into inheritance tax (IHT) risks creating “unfair inconsistencies” between DB and DC members and between married and unmarried couples.
In its response to the consultation, which closes on 15 September 2025, the firm welcomed the government’s goal of stopping pensions being used as wealth transfer tools, but said parts of the draft legislation “may not be in keeping with the policy objectives or the Government’s wider pensions policy”.
Sackers highlighted the shift from DB to DC, meaning more families depend on DC pots to support partners and children.
It said: “Unused pots often haven’t been used for wealth planning, and they provide an alternative to a spouse’s pension and, particularly on early death, to children’s pensions.”
The firm warned the rules could penalise unmarried couples. If a married saver dies with a £500k DC pot, it passes to their spouse tax-free. But if the couple are unmarried, IHT could cut the amount left to support the surviving partner and children.
Sackers said: “This exacerbates inconsistencies in the treatment of different types of pension.”
It also questioned why guarantee periods are included in the IHT net. It said: “Guarantees aren’t tax planning, they’re about making sure people get value from their pension if they die soon after retirement.”
Sackers called for a simpler definition of “death-in-service benefit”, warning that relying on the term “active member” could unintentionally exclude sole traders, partners or those in life-cover-only schemes.
Other recommendations include clarifying trustees’ augmentation powers, extending the proposed three-week IHT payment deadline to fit quarterly tax reporting, and allowing a “scheme pays” option so tax can be deducted directly from benefits.
The firm also urged HMRC to allow relief if DC pot values fall after death and to confirm that joint-life annuities and trivial commutation lump sums are excluded where intended.
Sacker partner Claire van Rees says: “The draft legislation addresses many practical concerns raised by the pensions industry around workability of the initial proposals, albeit by pushing much of the burden on to personal representatives. However, some issues remain, particularly around clarifying exactly when death in service lump sums will be excluded from scope of IHT, and on some practical implementation areas.
“The overall policy also extends differences in treatment between unmarried couples and those married or in a civil partnership, particularly as DC pensions grow in importance. Once the legislation is finalised, trustees and pension scheme administrators will need to take stock on how to implement new processes, and what they should be communicating to members.”