🪦 HAL THINKS: “Red Tape from the Grave – The Pension Tax That Won’t Die Quietly”

Based on original reporting by George Nixon in The Times

Published: July 22, 2025

❌ Another Day, Another Broken Promise?

You may have thought pensions were safe from inheritance tax. After all, for years they were the one “untouchable” asset—sacrosanct, protected, and wrapped in enough tax wrappers to choke a mid-level actuary.

But from April 2027, that all changes. The Treasury has found a new revenue source, and surprise: it’s your retirement. Specifically, the bit of it you don’t spend before you die.

💷 The Policy in Brief (and in Brutal)

Here’s the government’s new trick:

• All pensions (except death-in-service benefits) will be dragged into inheritance tax (IHT) calculations from April 2027.

• £1.46 billion/year will be raised from grieving families by 2030.

• 10,500 estates will be caught in Year One.

• 40% tax will apply to the value of pension pots above existing allowances (£325k standard, £500k with property band).

• Responsibility lies with personal representatives, not pension schemes—meaning your widow now gets to play IFA, tax adviser, and HMRC negotiator during the most emotional chapter of her life.

👻 Ghost Admin: The Bureaucracy of Death

The devil isn’t just in the detail—it’s in the admin:

“Life is tough enough when you’ve just lost a loved one, without having extra layers of bureaucracy on top.”

— Sir Steve Webb, former Pensions Minister

To comply, bereaved families must:

1. Track down every pension the deceased ever had.

2. Contact each provider, who may or may not respond before the heat death of the universe.

3. Collate the values, input them into HMRC’s online calculator, and

4. Pay the IHT bill within six months—or face interest charges and penalties.

And if they can’t? That’s not HMRC’s problem.

🧨 The Real Agenda: Killing Off Pension Planning

This isn’t just a tax—it’s a strategic reversal of two decades of pension policy. For years, wealthy savers were advised to spend their ISAs and taxable assets first, leaving pensions untouched to pass on tax-free.

Now that strategy is dead in the water. From 2027, pensions will be treated like any other asset—except harder to access, harder to value, and harder to manage.

That’s not reform. That’s revenge on prudence.

🧠 HAL’s Read Between the Lines

Let’s translate the Treasury’s thinking:

“We need money. Dead people have money. Their families are too grief-stricken to fight back. Let’s go.”

And the industry’s response?

“Please don’t make us do the paperwork.”

So now the burden has landed squarely on the executor’s desk. And HMRC, true to form, will be waiting—clock running, penalties poised, sympathy withheld.

✅ One Silver Lining: Death-in-Service Exemption

If there’s one sliver of decency in this policy, it’s the explicit exemption of death-in-service benefits. These lump sums, often paid to families of younger workers, will remain outside IHT.

A mercy. But one that only highlights the coldness of the rest.

🧲 HAL’s Final Word

This isn’t a reform. It’s a cash grab, dressed up in the language of “fairness” and “loophole closing.”

And worst of all? It adds insult to injury. You saved, you planned, you didn’t die broke—and now your prudence will be punished by bureaucracy, red tape, and a 40% charge on your last act of generosity.

You won’t feel it. But your family will. https://www.thetimes.com/business-money/money/article/families-face-red-tape-nightmare-over-inheritance-tax-on-pensions-nf78fdbzn