The IFS has set out proposals that it says would make the tax treatment of pensions at death “fairer and more economically efficient”.
Today, the IFS set out proposals that it says would make the tax treatment of pensions at death “fairer and more economically efficient”.
Alice Guy, Personal Finance Editor, interactive investor, says: “Today’s report is strong stuff and the content will be up for debate, to say the least. As part of this conversation, it’s crucial that trust in pensions is preserved and that investors continue to see pension saving as a tax-efficient and attractive in the long term.
“Inheritance tax and pensions are highly emotive and any changes could have a significant impact on trust and confidence in the pensions system.
“Changing the rules around inheritance tax and pensions could significantly impact on the attractiveness of pension saving and income drawdown, whereas defined benefit pensions with survivor benefits would not be impacted by a rule change.
“Pensioners with a defined contribution pension need to keep their pension pot invested, to enable them to draw an income right through retirement. Those who have investments left when they die are not necessarily wealthy but are simply keeping investments to enable them to draw an income for as long as they live.
“Any changes would disproportionately impact on unmarried couples, who are not entitled to spousal IHT exemptions and may have significant tax to pay on an inherited pension.
“More than anything, retirement outcomes are currently being compromised by a lack of understanding about pensions. It’s important that we focus on making sure the next generation are retirement-ready.
“The interactive investor Great British Retirement survey showed that nearly one in four (24%) of the general population say they know nothing about pensions (GBRS report) and many are overestimating their retirement income by an average of around 30%.
Financial education plays a crucial role and ii remains frustrated by the clear lack of joined up, properly resourced financial education in the UK.”
Find out more about ii's Great British Retirement Survey, including a link to the full report, here.
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