WBR Group (WBR), the UK’s largest independent provider of SSAS administration and tax advisory services, has published the results of a recent survey conducted over the last two weeks and during a webinar on inheritance tax (IHT) and pensions which has revealed overwhelming opposition to the proposed introduction of IHT on unused pensions. The survey, which gathered responses from [75] industry professionals, highlights significant concerns about the fairness and practicality of the proposals.
Caitlin Southall, Head of SSAS Proposition at WBR Group said: “The proposed introduction of IHT on unused pensions is not just a concern, it is a looming disaster for the pensions industry. These changes are not only impractical but also a grave injustice to those who have diligently and responsibly saved for their retirement. We implore the Government to reconsider these draconian proposals and collaborate with pension experts such as us to forge a more balanced and equitable solution that truly supports long-term pension savings. The future financial security of countless individuals hangs in the balance.”
90.41% of respondents agreed or strongly agreed that the introduction of IHT on unused pensions is both retrospective and unfair.
One respondent commented, "Our strategy over many years has been to leave our home and pension so that our son can look after his severely disabled brother. These plans are ruined and at our age, there is no time to make effective alternative arrangements. Our IHT bill has gone from around £100k to around £800k as a result of the budget. The impact on our family is catastrophic and if our son cannot afford to be a 24/7 carer his brother will have to go into care, where he is likely to be miserable, and the cost will end up with the local authority. This has not been properly thought through for families with caring responsibilities.”
Furthermore, an overwhelming 97.26% of participants agree or strongly agree that the proposals force pensions into an IHT regime that does not accommodate the practicalities of current pension rules or administration processes. The timescales for payment of any IHT are deemed unworkable, failing to acknowledge the complexities of discretionary death benefits. This sentiment reflects the industry's concern that the proposed changes are impractical and could lead to significant administrative challenges.
One professional noted, "A change of this nature and in the manner proposed undermines the merits of undertaking long-term personal financial planning. Which does not serve the interest of individuals or the state."
Additionally, 97.26% of respondents agree or strongly agree that trustees and providers will incur additional costs to administer the proposals, which will likely be passed on to consumers. This burden is considered unfair and is expected to reduce pension engagement, contrary to Government policy. The increased costs and administrative burden are seen as significant obstacles that could discourage individuals from engaging with pension schemes.
One respondent said, "The proposals are terrible and have not been thought through. All client feedback has been negative and the retrospective nature of this is unreasonable."
The survey also reveals that 100% of those surveyed agreed or strongly agreed (82.19% strongly agree) that the proposals assume personal representatives will have the necessary information to pay discretionary benefits immediately after a member's death and that the pension has sufficient liquidity to cover any IHT due. These assumptions are seen as unreliable, further highlighting the impracticality of the proposed changes.
One comment emphasised, "The pension/IHT proposals are highly retrospective and consequently potentially Ultra Vires and subject to future legal challenge and the biggest mis-selling of pensions proffered by UK governments since pension simplification in 2006."
Taken as a whole, 82.19% of respondents strongly agree (and 16.44% agree) that the proposals, along with the potential unexpected tax burden and increased complexity, will act as a major disincentive for consumers to engage with pensions. The survey results underscore the industry's strong opposition to the proposed IHT on pensions, highlighting the need for a more practical and fair approach that aligns with current pension rules and administration processes.
In response to these findings, Caitlin from WBR Group has published an open letter to the pensions minister, Torsten Bell, urging a reconsideration of the proposed IHT changes. The letter emphasises the industry's concerns and calls for a more thoughtful and equitable approach to pension taxation.
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