FINANCIAL experts have responded to the Government’s decision to proceed with plans to bring pensions within the scope of Inheritance Tax from April 2027, calling the decision “grossly unfair” and saying it “may prompt individuals to withdraw funds prematurely or reconsider pension saving altogether”.
Others said it is “a spectacular own goal by the government” and could leave “grieving families trapped in limbo for months or even years”. One concluded: “It is true that Rachel Thieves your children’s future.”
In an official announcement, the Government has made two notable changes to the original proposals: first, the liability for reporting and paying any Inheritance Tax will rest with personal representatives, rather than pension scheme administrators; second, death in service benefits payable from registered pension schemes will remain outside the scope of Inheritance Tax. The Government says it expects the change to raise approximately £1.5 billion per year by 2029/30.
Pension saving under threat
Anita Wright, Chartered Financial Planner at Ribble Wealth, was scathing in her assessment of the decision: “Millions who saved in good faith under a specific tax framework will now face the prospect of unused pension funds being subject to Inheritance Tax—something they were led to believe would not apply. It introduces uncertainty and may prompt individuals to withdraw funds prematurely or reconsider pension saving altogether.
“Individuals who built up pension wealth with the expectation of IHT exemption may now be incentivised to draw down pensions earlier or seek alternative strategies to mitigate exposure. It undermines confidence in pension rules and forces advisers to rethink intergenerational planning assumptions.
“Placing the burden on personal representatives rather than pension scheme administrators adds administrative complexity at an already difficult time for families. Executors may lack the specialist knowledge to calculate tax correctly on pension assets, particularly when those pensions are held across multiple schemes or involve complex beneficiary arrangements.”
Daniel Wiltshire, Actuary & IFA at Wiltshire Wealth commented: “Additional IHT complexity risks leaving families in probate purgatory. The system is already close to breaking point and further administrative burdens could tip it into systemic failure, leaving grieving families trapped in limbo for months or even years.”
Unused pension fund taxation “grossly unfair”
Samuel Mather-Holgate, Independent Financial Adviser at Mather and Murray Financial, said the change was “grossly unfair”: “There’s still time for Rachel Reeves to backtrack on this grossly unfair proposal. Not only had savers been incentivised to put money in pensions because of their flexibility and tax efficiency, but they’ve fallen from the most tax-effective to probably the worst place to keep your money if you’re worried about IHT. If you die aged over 75, you have the double standard whammy of IHT on your fund and income tax for the beneficiary when they draw the benefit. It is true that Rachel Thieves your children’s future.
“The practicalities of making personal representatives pay the IHT means HMRC will be able to levy interest on staged payments, whilst the pension scheme could have facilitated this. This is another cynical ploy to raise extra coffers from bereaved families.”
Scott Gallacher, Director at Rowley Turton commented: “The exemption of death-in-service benefits is welcome, but this policy remains deeply damaging to public confidence in pensions. It’s hard to argue that those under minimum retirement age are engaged in IHT avoidance—they’re just saving sensibly for the future.
“Shifting liability to personal representatives will simply increase probate costs and complexity. It looks like a move driven by pension provider lobbying to pass the burden to bereaved families. The government claims the average IHT hit will be £36,000, but in our experience, many families face six-figure tax bills. All for a relatively small gain to the Treasury, at the cost of long-term trust in pensions. This is a spectacular own goal by the government—on the very day the Department for Work & Pensions revealed a looming zombie retirement crisis.”
