Rachel Reeves creates financial nightmare for pensioners – right at the end of their lives
The Chancellor’s tax meddling is creating a massive headache for pensioners and their families.
Chancellor Rachel Reeves has created yet another financial worry for pensioners (Image: Getty)
This one will dog pensioners to the end of their days, and continue to cause misery for grieving loved ones for months or years afterwards. As ever, it can be pinned on Rachel Reeves’s two defining flaws as chancellor: an obsessive urge to tax at every possible opportunity, and basic financial incompetence. She never seems to consider the consequences of her actions, and this time they will be dire.
It all stems from her decision to slap inheritance tax on unused pensions, announced in her maiden Budget and due to take effect from April next year. The change applies to defined contribution pensions invested in the stock market, not the more generous final salary schemes enjoyed by many public sector workers, which Labour wouldn’t dare touch.
Until now, these pensions sat outside inheritance tax, allowing many people to pass money on to loved ones. Reeves couldn’t stand that, so she’s putting a stop to it – and creating a dreadful mess in the process.
Sorting out an estate after death is already staggeringly complex, as anyone who has acted as an executor will know. Executors must arrange the funeral, apply for probate, value the estate, settle debts, pay costs, distribute assets and deal with HMRC. The whole process can drag on for years. From 2027, it will get even worse.
Agreeing to become an executor is a huge responsibility, as they can be held financially liable for mistakes. If they miss a creditor or make an error, they may have to cover the shortfall themselves. Executors are often criticised by frustrated beneficiaries, caught in family disputes and blamed for delays beyond their control. They shoulder all of this burden for no pay, simply to help someone they love.
Many will never have handled anything so financially complex before. But once they take on the role, they can only step away with a court order. Effectively, they’re trapped.
Reeves is about to make their plight far worse, simply to scrape together an extra billion or so for the Treasury.
At present, executors only need to notify pension providers of a death. From 2027, they’ll also have to calculate the value of any remaining pension assets and ensure the correct inheritance tax is paid.
They’ll need to track down those pensions first – no small task when around £30billion gas gone missing. All before probate is granted, delaying access to money for surviving spouses and partners. The process has been described as a “prolonged nightmare”. Reeves is making it longer and crueller.
Worse, she’s dumping this burden on ordinary people at the worst possible moment, when they’re grieving.
It won’t stop there. As awareness grows, more people will refuse to act as executors. It’s hard to blame them. That will create fresh anxiety for pensioners, who may struggle to find anyone willing to take on the role, and feel anxious for those who have agreed.
The raid will only affect estates with total assets, including pensions, above the £325,000 nil-rate band, or £500,000 if a home is passed to children or grandchildren. But since property is included, more and more ordinary families will be caught out.
It’s always hard to say no when asked to be an executor. Under Rachel Reeves, it’ll get harder to say yes.
If Reeves is determined to tax pensions, there are simpler ways. Instead, she’s combined maximum complexity with maximum misery. As she always does.
