According to HMRC predictions, applying inheritance tax (IHT) on pensions from 2027, will raise around £1.5bn a year by the 2029/30 tax year.
Speaking to Money Marketing, Barnett Waddingham self-invested pensions technical specialist James Jones-Tinsley questioned if that figure is worth all the work, time, effort and emotional energy that comes with the decision.
Jones-Tinsley explained that a personal representative will now have responsibility for a deceased person’s pensions, adding administrative burden for bereaved families.
Additionally, the work involved in adding IHT to pensions from the government’s perspective is a large task.
Chancellor Rachel Reeves has received criticism for announcing this change, with the House of Lords’ Finance Bill Sub-Committee launching a call for evidence on 17 September to consider the 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.
IHT is already bringing a sizeable amount for the government, with receipts reaching £5.2bn in the first seven months of the 2025/26 tax year, £200m higher than the same period last year, according to HMRC data.
The figures extend a long-running upward trend. Nucleus has predicted that the full year receipts may be approximately £8.8bn (£8.2bn in 2024/25).
Advisers have also reacted to the decision.
“I don’t think the adviser community is happy about the government’s IHT rule,” Strategic Wealth Partners managing director Amyr Rocha Lima has said.
Lima made these comments on 9 October at the Money Marketing Interactive conference in London.
Jones-Tinsley said the government is hoping more money will be raised over time from this rule but still questions if the cons of this measure truly outweigh the smaller pros, especially in comparison to how much IHT is already bringing the government.
However, he added that the pensions dashboard could make making hunting down a deceased relatives’ pensions and their providers easier as it will all be displayed in one place.
