The Institute of Fiscal Studies has published a report suggesting that for individuals dying before age 75, the tax treatment of funds remaining in their pension is extremely favourable. According to the IFS, this creates an incentive – for those who are able to do so – to fund their retirement from elsewhere so as to preserve their pension funds for bequests.
The report sets out options for “a more coherent” tax regime for funds remaining in pensions at death, including the suggestion that basic rate income tax could be levied on all such amounts, or that pension pots should be included in the value of death estates for IHT purposes.
https://ifs.org.uk/publications/death-and-taxes-and-pensions
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