The Budget – Initial Thoughts

After the most speculated about Budget in my lifetime, I’m writing to share a clear overview of the main changes announced in the 2025 UK Budget (26 November 2025) and what they may mean for your finances. These updates span tax, pensions, property, and long-term planning, so it’s worth being aware of the areas that may affect you over the coming months and years.

Headline Changes

1. Income Tax & National Insurance Thresholds Frozen

The Chancellor confirmed that tax thresholds will remain frozen until 2030/31.
While rates haven’t risen, the freeze means more people will gradually be drawn into higher tax bands as incomes rise.

Why it matters:
This “fiscal drag” effect may increase your overall tax bill over time. We’ll continue to manage your income and allowances efficiently to help mitigate its impact.

2. Higher Taxes on Dividends, Savings & Property Income

A range of investment-related taxes will rise from 2026, targeting:

• Dividend income

• Savings interest

• Rental and other property income

Why it matters:
Tax-efficient wrappers (e.g., ISAs, pensions, some trust structures) become even more valuable. We may review the positioning of your investments to keep your portfolio as tax-efficient as possible.

3. Changes to Pensions & Salary Sacrifice

Reforms to pension salary-sacrifice arrangements will reduce the tax advantages for some employees from April 2026.

Why it matters:
If you make contributions via salary sacrifice, it may be worth reviewing whether this remains the optimal method. I’ll revisit this with you during our next planning review.

4. Property Taxes & New High-Value Property Surcharge

A new annual surcharge will apply to residential properties valued over £2 million from April 2026.
At the same time, taxes on property income will increase.

Why it matters:
Clients with higher-value homes or rental properties may see increased costs. We can explore ways to structure property holdings more efficiently where appropriate.

5. CGT & IHT Reforms Already in Motion

Although not new in this Budget, two significant reforms remain highly relevant:

• CGT rate changes (in effect since October 2024):
  Gains on most assets are now taxed at 18% (basic-rate) or 24% (higher/additional-rate).

• IHT reforms taking effect from 6 April 2025:
  The UK will tax long-term residents on worldwide assets for IHT purposes. Trust rules have also tightened.

Why it matters:
Clients with international assets or trust structures should review estate-planning arrangements to ensure they remain appropriate.

6. Economic Outlook & Spending

The Budget was set against subdued growth forecasts from the OBR. Government spending will focus on welfare support and business investment, with a continued drive toward fiscal consolidation.

Why it matters:
A cautious economic backdrop reinforces the importance of diversification and long-term discipline in your financial plan.

What Happens Next?

The devil is always in the details when it comes to Budgets, and it may be some days before all the implications are known. However, you can be assured that a more detailed communication on how the announced changes will likely impact you and all my clients will follow over the next few days.

I hope you found the above interesting. As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Deposit Protection Scheme Limits to Increase

It’s nice to see at least one threshold is rising with inflation!

The Prudential Regulation Authority (PRA) has confirmed that its deposit protection limit for banks will rise from £85,000 to £120,000 from December.

The protection limit is the maximum amount banking customers can receive in compensation were their bank to fail.

It is paid for by the Financial Services Compensation Scheme (FSCS), which is funded via a levy on banks and all FCA-regulated firms. 

I hope you found the above interesting. As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

An all-time high doesn’t mean anything!

As the FTSE hit a new record yesterday and now sits very close to 10,000 for the first time, I was reminded of a piece by 7IM which cam a cross me desk last week. I have reproduced it below.

“This year (to the end of September) the FTSE 100 has notched up 28 new records. 28 “all-time highs” in nine months, a pace which compares pretty favourably to the previous 28 all-time highs which took seven years to achieve (2018 through to 2024).

It’s a similar story in the rest of the world, with the US and Europe, but also Mexico, Japan, South Korea and many other markets all reaching new levels. It’s a funny thing though; for lots of investors, the phrase all-time highs doesn’t prompt celebration or acknowledgement of a plan that’s working (why else do you invest, if not to grow the assets?!). Instead, it often leads to questions about selling, wondering whether things have gone too far, or worries about an impending crash.

An all-time high doesn’t mean anything

People overstate how important an all-time high is. Maybe it’s a lifetime of hearing analogies between markets and rollercoasters; we have some intuitive idea that a peak is followed by a decline; what goes up must come down.

But markets aren’t rollercoasters, and all-time highs are often misunderstood and overemphasised.

The cynic in me blames lazy journalism. A market at all time highs is worth 500 words. And a market off all-time highs? Sure, have another 500 words. The gift that keeps on giving.

But there are two simple truths to try and remember when the “all-time high” hype train gets going:

1. Stock markets go up over time.

2. Stock markets bounce around a lot.

Any time something hits an all-time high – that’s just point 1. And any time something falls from an all-time high – that’s just point 2.

Any single all-time high isn’t actually that important. It’s just part of the way markets work.

All-time highs are vital

The thing is people also underestimate how important all-time highs are. Without the occasional all-time high, your investment will go nowhere.

Take the Japanese stock market, the TOPIX. It’s had 15 new highs this year. And it had three new highs in 2024. But before that?

The last time the TOPIX was at an all-time high before 2024, the Berlin Wall had just fallen, a show called The Simpsons had just launched, and the British music scene was dominated by Kylie Minogue and Jason Donovan: December 18th, 1989.

So, for 35 years (about 8000 trading days) Japanese markets made no progress.

Compare that to the FTSE 100: 264 all-time highs between 1989 and 2024. That’s not so many really; around 3% of those 8,000 days.

And yet it resulted in the index being 220% higher than it was on December 18th, 1989 – more than triple your money.

To put it another way; NOT being at an all-time high most of the time (97%!) is ok. That 3% does a lot of heavy lifting. But once that 3% drops to zero, it’s a very different matter – as the TOPIX showed for more than three decades.

Don’t forget the dividends

Compounding creates wealth more efficiently than any other method. Take your dividends and stick them straight back into the market. Make your money keep working for you, and it creates more money!

And most of the attention on all-time highs focuses on stock indices which DON’T INCLUDE DIVIDENDS!

Much like Japan, the FTSE 100 index had a period without any new highs – from December 1999 to February 2015. But if you’d been invested through that period and kept adding your dividend payments back to your holdings, the 15-year wait got a lot shorter. You still had to wait for 5 years, but that’s the risk with any investing!

Source: FactSet

Managing money is about managing emotions

In the investment team, we don’t pay attention to “all-time highs.” I’d love it if the media did the same, but I suspect that’s not going to happen any time soon.

So, instead, the best advice I can give is to reframe how you respond to headlines about the phenomenon.

New all-time high? “Great, that’s why I invest – growth in capital over time, I certainly don’t want my money standing still!”

Market no longer at an all-time high? “Excellent, my dividend reinvestments are buying more stock than they were yesterday!” Or even “Ah! The sale is on! What a fantastic opportunity to invest at a cheaper price!”

Now of course, depending on your time horizon, it might feel a little bit more pressing when stock markets fall. But that’s what the rest of the portfolio is for (and why it’s so important to get the right blend of investment assets for your stage in life). The bonds and alternative parts of the portfolio are there to stabilise things – to give the equity side the time and space to get back on an upwards trajectory!”

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

 Graham Ponting CFP Chartered MCSI

Managing Partner

Unintended consequences

Ever noticed a Wilkes’ Gob?

You may well have seen one at some point, if you’ve spent any time in Leicestershire (although you were probably looking at the beautiful countryside).

Or you might have seen something similar if you’ve been to Brick Lane in Shoreditch (although you were probably looking at the beautiful selection of curries).

A Wilkes’ Gob is a type of brick. Specifically, a double-sized brick:

Source: Wikimedia Commons, Measham, Leicestershire, Wilkes’ Gob on the left

In 1784, the British government needed cash to cover the cost of the American War of Independence. And with new towns springing up as the Industrial Revolution took hold, MPs imposed a “brick tax” of 2 shillings and sixpence for every thousand bricks produced.

The result? BIGGER BRICKS. For fifteen years, until the government closed the loophole.

The Wilkes’ Gob is a wonderful real-world example of why clever tax ideas often don’t produce sensible outcomes – people find other solutions.

Ahead of the budget in a few weeks, here are a couple of the other more … quirky … taxes in British history; and the resulting behaviour, which very rarely involved paying the tax!

• The Hat Tax was also introduced in 1784 (expensive, that war!). The idea was that richer people would have more hats, so would have to pay more tax. Quite aggressively, the punishment for forging hat-tax stamps was death! Of course, people either stopped wearing hats, or started wearing these new-fangled things called “caps” which were exempt!

•  The Window Tax (1696). In the 17th century, most people thought the government had no business asking them about their income. So when William III needed to raise money, he had to do it based on things his revenue officers could count. Like windows. More windows = bigger house = more money = more tax. Result – bricked up windows all across the country (which you can still see). And, allegedly, the creation of the phrase “daylight robbery” to describe the tax.

But. The most surprising tax fact we learned during our research: until 1990, in the UK, a married woman’s tax rate was the same as her husband’s! (Her income was simply added to his to determine the tax rate paid) And when that rule changed, with the advent of independent taxation, the UK workforce saw a significant uptick in female workers.

Tax isn’t just about the numbers. It’s about the behaviour.

I’ll share a more considered take on the Budget once the details are out. For now, the speculation isn’t helping anyone — and Reeves’ rather cryptic remarks yesterday didn’t exactly bring much clarity!

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Government’s Response to AJ Bell’s Petition for a Pensions Tax-Lock

I wrote to you on 8 October regarding AJ Bell’s call for the Government to protect key pension tax incentives and put an end to speculation around the future of tax-free cash and pension tax relief.

On 1st October, the wealth manager launched a parliamentary petition urging a public commitment to a “Pension Tax Lock” – a pledge not to alter tax-free cash entitlement or pension tax relief for the duration of this Parliament.

AJ Bell argued that such a commitment would give savers much-needed certainty, enabling millions to plan for retirement with confidence.

As the petition attracted over 10,000 signatures, the Government was required to issue a formal response.

The response is as follows:

The Government is committed to ensuring pensioners have security in retirement and has launched a Pensions Commission to look at what is required to ensure the system is strong, fair and sustainable.

The Government wishes to encourage pension saving, to help ensure that people have an income, or funds on which they can draw on, throughout retirement. The Government is committed to supporting savers at all stages of life. That is why, for the majority of savers, pension contributions made from income during working life are tax-free. This is known as 'pensions tax relief'. This relief is available at an individual's marginal rate. For example, contributions from a basic rate (20 per cent) taxpayer who contributes to a registered pension scheme in 2025/26 receives tax relief at 20 per cent. This makes pensions tax relief one of the most expensive reliefs in the personal tax system, costing £78 billion in 2023/24.

Investment growth of assets in a pension scheme is also not subject to tax. From age 55 (or when scheme rules allow a pension to be taken), up to 25 per cent of the pension can be taken tax-free (capped for most at a maximum of £268,275), depending on scheme rules. Pension income received (for example as a regular annuity payment or as income drawn down from a pension) is subject to income tax at an individual's marginal rate, to reflect the fact that pensions in payment are a form of deferred income and have not been previously taxed.

With regard to the proposed ‘pension tax lock’, the Government does not comment on proposed tax changes or tax related speculation ahead of Budgets.

The Government recognises the importance of promoting confidence in pension saving and is committed to ensuring future generations of pensioners have security in retirement. This is why the government announced a landmark two-phased review of the pensions system days after coming into office.

The first phase, the Pensions Investment Review, focused on reforming the pensions landscape to boost savers’ pension pots. These reforms will be delivered through the Pension Schemes Bill. The Pensions Commission will build on these foundations and make recommendations to the government on the broader questions of adequacy, fairness, and sustainability to guide the long-term future of our pensions system. The Pensions Commission will be undertaken by Baroness Jeannie Drake, Sir Ian Cheshire and Professor Nick Pearce.

I am afraid this kind of wishy-washy response was to be expected, and it doesn’t really take us any further forward.

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Chancellor won't dare to slash pension tax-free cash, says former Pensions Minister Steve Webb

The following is an article from This is Money on the MSN website by Tanya Jefferies.

Abolishing pension tax-free cash - or even just capping how much you can take - would cause such public uproar the Chancellor is unlikely to do it, says former Pensions Minister Steve Webb.

Speculation Rachel Reeves might clamp down on the popular perk in the Budget has prompted a rush of pension withdrawals, as some savers defy money experts' warnings doing this could harm your retirement finances for no reason.

'For example, what would people do if they had planned to use their lump sum to pay off a mortgage but now had to pay a chunk of tax on it?' 'Most people would feel that a change like this was like "moving the goalposts" and was fundamentally unfair.'

Fear that the Government will tighten the rules on tax-free cash, and people trying to pre-empt its plan to levy inheritance tax on pensions from April 2027, have prompted a rush of withdrawals. There was an unprecedented 60 per cent surge in tax-free cash pulled from pensions, amounting to £18 billion, in the last financial year.

Last week investment broker Bestinvest reported a 33 per cent rise in withdrawal requests from customers with self-invested personal pensions or Sipps in September. Money experts warn the decision is irreversible, and could damage your retirement finances if you are not planning to do something sensible like clear debt, or fulfil cherished spending plans for a home makeover or a dream holiday. 

Some savers are pulling cash to give away as an early inheritance, which experts say they must balance carefully against denting their own retirement. If you give money away and survive seven years it typically falls outside of the inheritance tax net.

You can miss out on valuable investment growth under the tax protection of a pension in future - especially if you just stick the money in a current or savings account.

Could the tax-free cash cap be lowered? 

Meanwhile, Webb says that if the Government did decide to cut the tax-free cash limit, it would probably have to introduce some form of ‘transitional protection’ to cushion the impact on anyone close to retirement.

But this would risk falling foul of age discrimination rules, and be so complicated it would probably take until at least 2027/28 to implement.

'A comprehensive system of transitional protection means few losers early on and therefore little money for the Government. A change which creates a lot of political fuss but little extra money before the election is not a great package for the Government.'

In this scenario, Webb says the Chancellor could announce ‘anti-forestalling’ measures in the Budget on 26 November to avoid a mad scramble to get tax-free cash out before the change. He explains this could say any protections on existing lump sums applied only to money paid in up to the Budget, not to money added between then and implementation of the change, but this would create even more complexity.

Webb goes on: 'There is a further challenge for a Labour government in cutting tax free lump sums. Those with long service in public sector schemes can build up a significant lump sums even if they have not been top earners. 'Hitting long serving public servants might be especially challenging for a Labour government and could inflame the already sensitive state of industrial relations in parts of the public sector.'

He adds: 'Whilst it’s theoretically possible that the Chancellor could drastically scale back tax-free pension lump sums, there are good reasons why successive Chancellors, having looked at this, have decided against.

'It would be a shock if the present Chancellor came to a different conclusion.'

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

AJ Bell calls on government to guarantee pension tax incentives

AJ Bell has urged the government to commit to retaining key pension tax incentives and end speculation over the future of tax-free cash and tax relief. 

The wealth manager launched a parliamentary petition on 1 October calling for a public commitment to a “Pension Tax Lock”, pledging not to alter tax-free cash entitlement or pension tax relief for the duration of this Parliament.

The petition (which you can sign, as I have by clicking the link) has already attracted more than 4,000 signatures and will require 10,000 to trigger a government response.

AJ Bell said a formal commitment would provide much-needed certainty for savers, allowing millions to plan for retirement with confidence.

The firm has long campaigned for a Pension Tax Lock, but the new petition invites customers, advisers, the wider public, and industry stakeholders to back the cause directly.

Tom Selby, director of public policy at AJ Bell, said: “When people save in a pension, they enter into a tax pact with the government. Take-home pay today is sacrificed for the long term, on the proviso that it will instead be taxed on withdrawal and comes with the added benefit of a 25% tax-free element.

“That is the foundation upon which the retirement plans of millions of Brits are built and requires a firm commitment to stability from government, matching the long-term financial decisions of savers making preparations for retirement.

“Committing to a Pension Tax Lock would show government is serious about a fair deal for workers, allowing today’s savers to enjoy the same pension tax incentives as their parents. It would also lay down the gauntlet to any future government tempted by a pension tax raid, offering genuine security to savers through a policy commitment that doesn’t require any increase in government spending.”

Selby added that stability would also benefit the wider economy by encouraging people to save more, leading to greater investment in UK businesses.

AJ Bell warned that continued speculation about changes to retirement incentives undermines public confidence and risks prompting people to make irreversible financial decisions based on fear rather than long-term planning.

The firm’s proposed Pension Tax Lock calls for government to protect two key pillars of the pensions system:

• Tax relief – maintaining the principle that pension contributions receive tax relief at an individual’s marginal rate, with tax paid on withdrawal in retirement.

• Tax-free cash – preserving the right to take 25% of a pension tax-free, up to the current maximum of £268,275.

AJ Bell said maintaining these core incentives would reinforce personal responsibility and strengthen the UK’s long-term savings culture.

Please feel free to pass this to anyone you think might find it of interest…..and who might be inclined to sign the petition!

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

2025 Budget Speculation

Here we go again.

After much speculation about what would be included in last year’s 2024 Budget, recent reports suggest significant changes await us in this year’s Budget.

If you believe what you read, the changes could affect anything from capital gains tax, inheritance tax, pensions and maybe even ISAs.

While investors are left wondering whether they should act now or wait, the good news is we’ve been here before. Last year, we faced similar uncertainty and widespread speculation about dramatic pension reforms, inheritance tax overhauls, and sweeping allowance reductions.

Our guidance was simple: wait for facts, not speculation.

How did that work out? Some feared changes didn't materialise, and others were less dramatic than predicted.

Capital gains tax rates increased from 10%/20% to 18%/24%. Stamp duty surcharges increased from 3% to 5%. But the biggest actual change - pensions entering inheritance tax from 2027 - wasn't even widely predicted.

Investors who avoided hasty decisions based on speculation were better positioned than those who reacted to every rumour.

This Year's Speculation

Current reports suggest the Treasury will be looking to find an extra £30 billion in tax rises.

The chancellor will be incentivised not to breach any manifesto pledges, and therefore income tax, VAT, and National Insurance appear to be safe from reforms.

This leaves room to generate the necessary revenue through adjustments to capital gains tax rates, pension reforms, changes to inheritance tax rules, restructuring of the ISA allowance, and various property tax adjustments. However, even this narrowed-down list does not provide enough information to base any firm recommendations on.

The same problem, therefore, remains. We don't know the details, timing, or even whether these changes will happen. Speculation often misses the mark while creating unnecessary anxiety. Political and economic realities change quickly.

Why "Wait and See" Is Still Sensible

Last year proved that reacting to speculation rather than facts typically leads to poor decisions. Waiting for official announcements means you can base decisions on actual proposals, understand the real impact on your situation, and avoid unnecessary complications.

For now, our recommendation is to focus on what you can control. Review your current arrangements to ensure you're using existing allowances and reliefs. Above all, we suggest avoiding significant changes based solely on media rumours.

Last year's patience served our clients well. This year, despite more intense speculation, the same principle applies.

When the budget is announced, we'll have facts to work with. Until then, patience beats panic, and facts beat speculation.

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

House of Lords to scrutinise Pension IHT proposals

One of the reasons I have been cautioning against knee jerk reactions in response to the government’s proposals on Pensions and IHT is that the die is not yet cast AND, we still have 18 months before the proposals become law……if they ever do.

What follows is from Dan Cooper at Money Marketing Magazine – I read these publications, so you don’t have to!

The House of Lords is to scrutinise controversial plans to include pensions in inheritance tax (IHT) calculations from April 2027.

The Lords’ Finance Bill Sub-Committee today (17 September) launched a call for evidence to consider the government proposals.

The Lords are inviting responses on how the reforms will work in practice, as well as whether the government has sufficiently taken into account the impact of the reforms on personal representatives and pension schemes.

The plans, which have been met with widespread criticism since they were first announced in the Autumn Budget last year, mean any unspent pension assets on death will be treated as part of the individual’s estate.

Once passed to the beneficiary, income withdrawn from the pension may then also be subject to income tax at their own marginal rate, depending on the age of the member when they died.

The double taxation proposed means that pension assets will be subject to a 64% effective tax rate on death where the pension pot exceeds the IHT nil-rate band allocated to the pension and the beneficiary is a higher rate taxpayer, rising to as much as 90% or more where the residence nil-rate band is tapered away entirely.

The government’s technical consultation on the proposals closed in January and in July, HMRC published draft legislation, confirming it plans to go ahead with the plan.

However, it confirmed one fundamental change: instead of pension scheme administrators handling the reporting and payment of IHT on unused pension funds on death, this responsibility will shift to the personal representatives (PRs), or executors, of the estate.

However, AJ Bell, which has regularly voiced its disapproval of the IHT on pensions plan, claims this will still create complexity and confusion.

The firm’s head of public policy, Rachel Vahey, added: “Despite a deluge of criticism of their original proposals, the government stubbornly decided to press ahead, changing the detail to push the responsibility of calculating and paying IHT firmly on the shoulders of personal representatives. “But it quickly became apparent the new proposals didn’t resolve any of the complexity; instead, they merely create new problems for bereaved families.

“Hopefully the Lords will be able to see what effect this will have and ask the government to change direction. Bereaved families will face a huge administrative burden, with the government insisting they settle the IHT bill within six months.

“Many people have complex financial affairs, especially those who die unexpectedly, meaning settling the bill quickly may not be straightforward.

“But it’s not too late. Ministers still have time to see that these proposals are not the best way to achieve their objectives.”

Vahey said there are alternative solutions to taxing pensions on death that won’t cause the administrative frustration, delays in payment and concerns for bereaved families that the current set of proposals threaten to, while still raising the same amount.

She believes income tax applied on withdrawals at the marginal rate of the beneficiary would be a far simpler alternative.

It means those inheriting pensions with the highest incomes pay more tax, while also offering simplicity given pension assets are already subject to income tax where the member dies after age 75.

In January, the CEOs of AJ Bell, Hargreaves Lansdown, Interactive Investor and Quilter signed a joint letter to the chancellor’s office opposing the plans.

According to AJ Bell research, pension IHT proposals are the most heavily opposed of the government’s key tax raising measures announced in its first year in office.

Just a fifth of Brits (21%) saying they support the policy, due to come into force from April 2027, while 44% say they’re against the government’s plans.

While those with influence are talking about this, there is still hope that common sense might prevail.

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Ros Altmann (ex-Pensions Minister) on IHT on Pensions!

The following is an article written by Baroness Altmann, giving her take on the imposition of Inheritance Tax on unspent pension funds from 2027.

“The Government has announced more detail about how it proposes that IHT on pension funds should be dealt with. I believe its proposals will be almost unworkable and will undermine the future of Defined Contribution (DC) pensions.

Such retrospective taxation undermines accepted norms of pension policy, making people less likely to contribute in the first place.

A couple of significant aspects of the original announcement have been changed.

They no longer plan to impose IHT on most death benefits, which is at least some good news. It will not now be up to the scheme administrators to arrange IHT payments after being notified of amounts by the executors, which of course all pension funds were up in arms about.

The industry, understandably, wants to avoid the horrendous delays, complexity and possible liabilities that would have involved.

However, instead of pension providers – who of course have professional departments to deal with pension administration matters – the Government plans to put the burden on the deceased person’s personal representatives (PRs), who are dealing with the whole estate. The changes, due to start in 2027, sound like a recipe for disaster and chaos.

Most people will have an incentive to take as much money out of their pension fund at the earliest possible date

Including all the person’s pensions in the IHT regime places potentially new burdens on Executors or PRs to find all the pensions – but we know there are huge numbers of ‘lost pots’ that even the deceased person may not have known about. They will have to identify all unused pensions, report them on the IHT Return and arrange for the tax to be paid, before distribution.

And all this while many of them will be bereaved relatives who are still coming to terms with the loss of a loved one and have never had much to do with pensions before.

The Government also plans to impose IHT on all unused pensions, even before age 55. So most people will have an incentive to take as much money out of their pension fund at the earliest possible date – especially if they are earning under the 40% tax threshold.

They can take this money at 20% tax, rather than risking dying soon and losing 40% of it. It is true that a spouse or civil partner can inherit the pension tax-free, but what about those who are single? This does not seem to be properly thought through.

It is also not clear who will inherit the pension? What if the Expression of Wish Form attached to the pension, contradicts something said about the beneficiaries of the will? This is a recipe for delays, chaos and potentially damaging liabilities on executors.

Beneficiaries may dispute who should inherit the pension, the executors may have to take legal advice, they will not know what to tell the pension provider and, meanwhile, interest will be running on IHT not paid within six months of death.

And what if a new pension comes to light after the estate has been distributed – perhaps an old entitlement that was not known about? Will the executors be blamed for not finding this and then be personally liable for the tax and interest?

Imposing IHT on pension funds is a disaster for the future of DC pensions. Such retrospective taxation, after so many people have already made careful plans for later life, undermines the principle of putting money aside for the long-term.

Indeed, there have already been significant withdrawals and the aim of encouraging more long-term investment by our pension funds, especially in less liquid assets, will be less likely to materialise.

People on average earnings are the most likely to strip their pension fund quickly, leaving nothing to live on apart from state benefits, if they survive to a ripe old age. These are the ones who need pensions most and the core group being targeted by auto-enrolment.

This policy is yet another example of how the Treasury seems determined to make pensions more and more complicated

This policy is yet another example of how the Treasury seems determined to make pensions more and more complicated. Time and again, new complexities are added.

Why on earth can’t the Government make things simple? I understand they wish to recoup some of the generous tax relief that has helped build up the pension fund but the pension should be dealt with separately, outside the estate.

For example, it would be much less damaging to pensions and much easier to manage, if there was a specific 20% charge on unused pension funds, which the pension provider could deduct directly and pay over to HMRC. No faffing about with IHT Forms.

Others have suggested a mandatory 10-year drawdown of the pension after death, although there may still be difficulties identifying who the beneficiaries are and who would be allowed to withdraw the money.

It’s not too late to avoid this disaster. I do hope the Government will listen to reason.”

Ros Altmann was pensions minister 2015-16 and is a member of the House of Lords

As always, if you have any questions—about this topic or any other aspect of your financial planning—don’t hesitate to contact me. And if you know someone else who may find this information useful, feel free to pass it on.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner