View more on these topics

Industry blasts ‘unfair’ pension death tax reforms

Proposals meaning savers who have already started drawing down an inherited pension will not be able to benefit from Chancellor George Osborne’s ‘death tax’ reforms have been branded “unfair”.

Osborne announced the 55 per cent penalty on funds passed on when someone dies before age 75 will be scrapped from April next year during his Conservative party conference speech in September. In these circumstances, the inherited pension will be free of tax.

Where the person who dies is over 75, however, the beneficiary will be able to draw down on the inherited pension at their marginal tax rate. A 45 per cent charge will be levied if it is paid as a lump sum, although this will also move to a marginal rate from 2016/17.

Following discussions with the industry, the Revenue has now confirmed that those who have been designated funds but have yet to start taking them as income will still be able to benefit from the new rules from April 2015.

However, anyone who has already made a withdrawal from an inherited pension will remain under the existing tax regime.

Talbot & Muir head of technical support Claire Trott says: “Those who have needed to take an income before 6 April 2015 from their dependants drawdown will continue to be taxed at their marginal rate.

“However, those that have not needed an income to date will not be taxed at the point they choose to take an income, provided the original member died before age 75.

“This seemed to me to be an unfair inconsistency but HMRC have confirmed this to be the case.”

Old Mutual Wealth pensions technical manager Jon Greer says: “It does come across as unfair to those who are taking drawdown. We don’t think there are huge amounts of people out there in this position, so in all likelihood it wouldn’t be a massive cost to the Treasury to extend the reforms.”


Compliance tip of the week: What lies beneath

The setting-up of a specific type of pension wrapper should be based on wider advice with respect to client investment needs, such as objectives, timescales, attitude to risk and so on. Usually, in the case of retirement planning, a Sipp wrapper would only be applicable if the assets required, as determined by the individual advice […]


FCA ‘naive’ to dismiss advisers’ FOS concerns

Advisers have slammed claims by FCA technical specialist Rory Percival that differences between the regulator and the Financial Ombudsman Service are a “myth”. Speaking at an Institute of Chartered Accountants of England and Wales conference this week, Percival said the issue of FOS decisions which go against FCA rules is often raised with the regulator. […]


Chris Sier: UK can learn from Netherlands on cost disclosure

This week the Financial Services Consumer Panel released a paper outlining key issues for long-term savers created by opacity in the true cost of investing in pensions. As auto-enrolment of workers into (predominantly) defined contribution pensions continues apace the impact of under-reported costs comes increasingly to the fore. Research has showed that over a savings […]

India: too big to ignore?

By Kunal Desai, head of Indian Equities, Neptune  India is officially the world’s fastest-growing major economy and remains firmly on track to become the third-largest economy by 2030, overtaking Japan and Germany. As an accelerating labour force combines with increasing labour productivity, is India getting too big to ignore? Click here for full article   […]

Trouble ahead - thumbnail

Pensions: trouble ahead?

The pace of change in the pension’s space has been little short of astonishing, and has left thousands of employers struggling to keep their pension policy compliant, and also on the right side of current best practice and governance. Many employers, and indeed many in the pensions industry itself, would like to see a period of no change during the next term of government. This would give all sides a chance to catch up and draw breath. 


News and expert analysis straight to your inbox

Sign up


    Leave a comment