IHT on pensions is becoming a bureaucratic nightmare

We know the drill by now: the government tries to reform pensions, but the system is so complicated that the changes have unintended consequences, or prove difficult to implement.

It looks as though this pattern will continue with the application of inheritance tax (IHT) on pensions, as announced in last year’s autumn Budget. The idea appears simple: ensure that pensions are primarily used to save for retirement, rather than as an IHT planning option. But the practicalities are a different matter.

Last week the chief executives of AJ Bell, Hargreaves Lansdown, Interactive Investor and Quilter wrote a joint letter to Chancellor Rachel Reeves, expressing concern over the impact of the proposals. “The complexity of the proposed approach… will lead to substantial delays paying money to beneficiaries on death and cause distress for bereaved families,” the letter reads.