The Government’s move to apply inheritance tax to pensions pre-55 has been slammed as “unbelievably unfair” by the industry.
HMRC confirmed that if a person dies before the age of 55, rising to 57 in 2028, their pension pots will be subject to inheritance tax when new rules come into force in April 2027.
Currently, the vast majority of people have to wait until they are 55 to access private pensions, with limited exceptions to this age restriction, including certain jobs with a protected retirement age benefit or those diagnosed with a terminal illness.
This means that people who die young face having inheritance tax levied on pension savings they never accessed.
The move has prompted widespread criticism, amid concerns it will put people off saving for retirement.
Caitlin Southall, director of SSAS transformation and proposition at WBR Group, says: “Including ‘unused’ pension funds in scope for IHT is unbelievably unfair. If people cannot ‘use’ these funds under current rules, why should they be subject to IHT?
“The Government is creating significant barriers for people to save responsibly for their retirement. By all means encourage people to use pensions for later life saving, and not as a wealth transfer tool, but this is not the way to do it.”
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