ILM formally raises concerns over IHT reforms on pension funds

The ILM has submitted a detailed response to HMRC ahead of proposed Government legislation to bring in Inheritance Tax (IHT) reforms affecting pension funds.

If the proposals go ahead, it will bring most unused pension funds and death benefits within the value of a person’s estate for Inheritance Tax purposes from 6 April 2027.

The ILM, along with other parties including the Society of Trust and Estate Practitioners (STEP) and Remember a Charity, is urging policymakers to reconsider the plans amid concerns that charitable beneficiaries may see legacies reduced or delayed as a result.

Changes in the proposed legislation include Personal Representatives (PRs) being liable for reporting and paying any Inheritance Tax due on unused pension funds and death benefits.

A special thank you must go to ILM Directors Rebecca Massey and Blerta Clubb for all their hard work and time spent collating the submission, full details of which can be found at the link below.

In summary, the submission makes four key points about the potential impact on estate administration:

· risk of reduced charitable legacies due to misallocated tax burdens

· delayed distributions and uncertainty in Estate Administration impacting charitable legacy funding

· charitable tax exemptions and the impact on 36% reduced IHT rate for charitable gifts

· impact on lay executors

It concludes: “Charities play a vital role in public life and are sustained in a very large part through legacy income. These proposed changes – if not adjusted – risk creating a situation where legacy income is delayed and potentially diminished.”

To read the submission in full, please click here.