Inheritance Tax on Pensions: Fair Policy or an Unworkable Burden?

Inheritance tax is one of those topics that can make anyone’s head spin—but it’s not just about numbers on a balance sheet. It’s about the things we work for all our lives, the homes we live in, the savings we build, and what we hope to leave for our loved ones. That’s why recent proposals to extend inheritance tax to unused pension pots have sparked such strong feelings on all sides.

The government, through Treasury minister Lord Livermore, argues that this is about fairness. In a recent debate in the House of Lords, he suggested that if someone is leaving an estate worth £1 million, they “probably have the cash to pay the tax.” From this perspective, taxing pensions is a way to make sure wealthier individuals contribute their fair share, keeping the system balanced and encouraging thoughtful planning for estates. Supporters see it as common sense: those who’ve benefited most from tax-advantaged savings should help support the wider system.

But the other side is just as passionate—and for many, deeply personal. Baroness Altmann and other pension advocates warn that these proposals could be “unworkable,” and might hit families who aren’t particularly wealthy in ways that are unfair or even harmful. Pensions aren’t just money—they’re the product of decades of work, sacrifices, and careful planning. Forcing families to use those funds to cover tax bills could mean selling off other assets, delaying inheritances, or even creating real financial hardship. To many, it feels like the government is putting a number on a lifetime of effort.

At the heart of the debate is a tricky tension: should policy focus on logic and efficiency, or on the reality of people’s lives? Is it really fair to assume that a £1 million estate is all “spare cash,” or does that overlook how wealth is tied up in homes, businesses, and pensions? How do we balance the need for a fair, sustainable tax system with the need to protect what people have worked so hard to build?

There’s no easy answer. Both sides raise points that make sense: fairness and sustainability versus protecting personal wealth and family security. It’s a question that’s as human as it is financial.

What do you think? How should we balance fairness in the system with the reality of people’s lives and savings? Where should the line be drawn between public good and personal rights?

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Inheritance tax on pensions is sparking fierce debate—how do we balance fairness, practicality, and the deeply personal nature of wealth?

Capital Gains Tax Expertise: The Tax Faculty LLP Managing Partner Charles Tateson Named UK Capital Gains Tax Advisor of the Year 2023

The Finance Monthly Taxation Awards recognises the achievements of tax professionals from around the globe.

Winning such an award is no small feat. It is a reflection of hard work, extensive knowledge, and an ability to navigate the intricacies of the UK tax system.

Read more about Charles and the award here.

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