According to our recent research, inheritances incurred by alternatively secured pensions could be subject to a tax bill of up to 55per cent. This is in addition to the inheritance tax, which would have already been taken of the pension fund. Alternatively secured pensions were introduced for people who had specific religious beliefs.
Two further charges, relating to inheritance via an alternatively secured pension, were made in last year’s pre-budget report, which apply when a death benefit pension lump sum is paid to a member in the same pension scheme, and is not a spouse or dependant. The first of the two charges is called an unauthorised payment charge of 40per cent and the second is unauthorised payment surcharge of up to 15 per cent.
Our view
Add to the above charges a scheme ‘fine’ sanction charge of 15% and a potential 40% Inheritance tax charge and you are in the realms on 80% plus death taxes. It is ridiculous that if you die the day before you are 75, the charge is 35% but the day after it could be 80%. This is tantamount to theft given that the Government only offer you 22% or 40% tax relief when you put money into a pension and could then take 80% when you die. There is a Downing Street petition, which is trying to get the unauthorised payment charge abolished. We hope that the Government may rethink its plans for the tax changes.