Proposals to tax pension pots will cause problems

There are ‘less costly quicker and ultimately more effective’ alternatives to the government’s inheritance tax plans for unused pension funds and death benefits from April 2027 says the Society of Pension Professionals (SPP) in its response to HMRC’s consultation ‘Inheritance tax on pensions: liability reporting and payment’.

The society highlighted the problems it believes will arise if the government goes ahead with making the pension scheme administrator liable for the reporting and payment of IHT. These include the potential for significant delays in paying out benefits causing unnecessary financial hardship to some beneficiaries. The proposals are also unclear as to what is in scope impose unrealistic timescales and apply interest charges or penalties on administrators for delays over which they have little or no control.

As a result the SPP has suggested two alternatives. The first is to continue using...