Inheritance Tax move on pension death benefits marks major change
Pensions & benefits DB pensions DC pensions Economy
The Chancellor’s announcement that from 6 April 2027 most unused pension funds and death benefits will be included within the value of a person’s estate for Inheritance Tax purposes goes much further than anything mooted prior to the Budget.
Commenting, Alasdair Mayes, Partner at LCP said:
Bringing unused pension funds and death benefits into Inheritance Tax is a major change. This doesn’t just capture the few who made use of the 2015 freedom and choice changes to take advantage of the ability to pass on pension wealth on death before age 75 free on IHT or income tax. Today’s announcement covers most standard death benefits from DB and DC pension schemes. Benefits paid under discretionary trust, such as a 4 times salary death in service benefit will be hit. This measure doesn’t just cover pensioners looking to pass on assets to their children and grandchildren. It could hit young families where one parent dies in their 20s or 30s. Many more people, including moderate earners will need to think hard about what impact the changes could have on them, especially unmarried couples.
