TISA proposes alternative approaches to government's pension IHT reforms
The Investing and Saving Alliance (TISA) has published research proposing alternative approaches to the government’s planned inclusion of unused pension funds in inheritance tax (IHT) calculations, set to take effect from April 2027. The Oxford Economics report, ‘Alternative Approaches to Taxing Unused Pension Wealth,’ challenges the current proposal by arguing that unused pension funds should remain outside the IHT regime and be subject to a separate tax framework. Two alternative policy proposals have been outlined: one that taxes beneficiaries directly at their marginal rate, and another that applies a standalone flat-rate inheritable pension tax charge on benefits above a nil rate threshold. The two alternatives are designed to achieve fiscal objectives while alleviating administrative complexities and delays for bereaved families, ensuring clarity for pension scheme members, beneficiaries and pension scheme administrators, while avoiding adverse behavioural impacts such as reduced pension contributions or premature withdrawals. The research also calls for further dialogue between industry and government to secure a fairer and simpler approach that protects vulnerable individuals.