Sipp provider AJ Bell says the Chancellor’s tax on scheme pensions is an outrage and says it is inconsistent with Labour’s new policy of reducing the inheritance tax burden.
The Chancellor yesterday announced in his PBR that the tax treatment applied to alternatively secured pensions would be extended to include scheme pensions where the member dies after age 75.
This introduced tax charges up to 82 per cent on surplus pension monies, once the member and his spouse or financial dependants have died.
A J Bell chief executive Andy Bell says: “82 per cent tax on unused pension funds is an outrage. How this is consistent with their newly introduced policy of reducing the inheritance tax burden is a mystery to me.
“This change in legislation has been brought about to prevent arbitrage between alternatively secured pensions, where the effective tax charge on death can be up to 82 per cent, and scheme pensions which had hitherto escaped this penal tax treatment.
“I am yet to receive an explanation from the government as to why the neutralising tax charge on unused pension funds is 82 per cent and not 55 per cent, in keeping with the tax charge on excessive funds over and above the lifetime allowance.”