Death and taxes may be the only real guarantees in life but simpler models should be considered to achieve the policy objective of making the IHT system fairer, writes Lee Halpin

Chancellor Rachel Reeves only mentioned ‘pensions’ once in her Spring Statement speech and that was in passing to highlight the growth agenda.

Having been upgraded from a ‘forecast’ and dubbed an ‘emergency budget’ by the opposition – the pensions industry hoped there wouldn’t be any major surprises, especially as we’re still getting our heads around the inheritance tax (IHT) shock from last year’s Autumn Budget.

Advisers have told us that pensions forming part of a person’s estate for IHT purposes has been a hot topic with many clients in the months since the announcement.

Recent news coverage citing research from the likes of Quilter and Downing supports what we’ve been hearing.

A large proportion of advisers are concerned about pensions being brought into scope for IHT and there has been a surge in demand for advice around the subject.

As part of the change, the government proposed that pension scheme administrators will also become liable for reporting and paying any IHT due on unused pension funds and death benefits.

Like several other industry players, we have raised concerns that the proposals, as they currently stand, risk introducing complexity and could ultimately lead to delays in settling estates.

Bereavement is a time of vulnerability. Many people who will have to deal with the financial affairs of a loved one won’t be professionals and up to speed with the various requirements. Timescales will need to be realistic and it’s vital to ensure people have the help and support they need to meet their obligations.

Of course, as advisers you can only work with the rules in place at any given time with an eye on what’s coming down the line and how clients could be affected by any changes.

We all have to wait a while longer yet to know exactly if the proposals are carried through or if the policymakers were in genuine listening mode during the consultation process and will adopt some pragmatism that many have called for.

The government is reviewing the responses it received as part of the technical consultation and plans to publish a formal reply and draft legislation “later in the year”.

Another thing we can expect further in 2025 is the second Budget under this Labour government, not before the Spending Review in June.

While the Spring Statement may have seen the pensions industry draw a collective sigh of relief, it might be a case of don’t hold your breath for the next Autumn Budget.

‘Adopt the brace position’

Speculation is never helpful, I know, and I won’t go as far as to making any specific predictions. But it never hurts for us to adopt the brace position, especially as surprises are becoming more of the norm.

And that’s causing quite the problem when it comes to retirement planning. Pensions are long-term savings vehicles and generally it seems people have little confidence in the system because of the many changes and often divergence of views between the political parties.

Pension products can be complex in nature. This is particularly the case in the self-invested personal pension and small self-administered scheme sector, where pensions may be invested directly in commercial property.

And that will often be for the small and medium-sized businesses operating throughout the country – the backbone of the UK economy.

The Spring Statement may have been more about the nation’s finances rather than personal finance, but the less optimistic forecasts as a result of challenging and uncertain backdrop will prompt many to question where the Chancellor will turn next.

Advisers help clients navigate through tax changes, but it would be nice to have more certainty around pensions.

Particularly as the government is keen to get more people confident in investing. Although, ISAs didn’t get a mention at all in Reeves’ speech, documents showed reform could still be on the cards to get the balance right between cash and equities.

Pensions are a form of investment and if we want to see engagement improve in this area then savers and investors need to have confidence.

If the government wants to get pension money to work harder for the economy, people need to trust that the goalposts won’t keep moving.

Death and taxes may be the only real guarantees in life but simpler models should be considered to achieve the policy objective of making the IHT system fairer.

For example, a model similar to how pension death tax operated prior to the introduction of the pension freedoms in 2015 but with a mechanism designed to achieve fairness, like an exemption for smaller pots.

There are many other areas where things could do with being fairer across the board too. Pensions inequality is just one of them.