22 January 2025
[UK – January 2025] ZEDRA has submitted its response to the Government’s consultation on inheritance tax reforms as they affect pensions.
ZEDRA echoes the views of the many bodies already that have called for a fundamental rethink. Besides the points others have made, ZEDRA notes that the paper makes a critical mistake about the existing income tax provisions relating to lump sum death benefits, which has led the Government to draw up an unworkable proposal for inheritance tax.
Of particular concern to ZEDRA, the proposed approach relies on bereaved family members acting promptly and rationally. But they do not always do that. Often, family members are so overwhelmed by grief, particularly after an unexpected death, that they cannot face administration that they find painful. The proposed approach will lead to more estates appointing personal representatives. Those estates will be drawn disproportionately from poorer members of society, and as a consequence, it will also lead to their lump sum death payments being delayed when they are grieving, vulnerable and in need of financial certainty.
Summarising, Alastair Meeks, Client Director at ZEDRA said: “HMRC were charged with drawing up a method to bring lump sum death benefits within the net of inheritance tax. They have done so without regard for practicality, an accurate understanding of the existing legal framework or a basic humaneness towards the bereaved. If the Government adopts the approach suggested, it will make things much harder for those living pay cheque to pay cheque at the moment of their greatest need. We cannot believe this is the policy intention. It is to be hoped that the minister instructs a complete rethink, for without a rethink this is a disaster of implementation in the making.”
-ENDS-
