Yesterday, we published a video and article on Lifetime Allowance Removal: Death Before 75. See: LTA Removal Death
By close of business on Friday, HMRC had made a U-turn following lobbying by many pension providers due to the complexity of the calculations required and therefore delays in paying out death benefits.
Last month, HMRC had published new rules for payments of funds in excess of the lifetime allowance on death would be taxable at the beneficiary’s normal rate of income tax.
This is now reversed to the old position of:
This may be worse for many than the proposed changes that have now been withdrawn but HMRC has confirmed it is still exploring a simpler solution ahead of when the lifetime allowance is removed in April 2024.
We still cannot understand any government (the lifetime allowance was introduced by Labour in 2006) that discourages you from saving in pensions by penalising you if you invest heavily in pensions and your future.
Perhaps a simple solution would be to reduce the tax charge on excess funds on death to 0% as they have done in life.