Death and taxes and pensions

Bericht

The tax system treats funds that remain in a pension at death extremely favourably. Where an individual dies before age 75, funds remaining in their pension escape income tax entirely - there was income tax relief when the money was paid into the pension and no income tax when the money is taken out. Furthermore, any funds that remain in a pension at death (at any age) are not subject to inheritance tax. This results in the bizarre situation where pensions are treated more favourably by the tax system as a vehicle for bequests than they are as a retirement income vehicle. As such, there is a large incentive, for those who can, to use non-pension assets to fund their retirement while preserving their pensions for bequests. This report sets out some options for a more coherent tax treatment of funds that remain in a pension at death. The reforms we propose, potentially with some transitional arrangements, would make the tax system fairer and more economically efficient. The revenue raised by moving to a more sensible system, even if relatively modest in the near term, could be substantial in the longer term. This revenue could be used to cut taxes elsewhere - including income tax and inheritance tax - or to ease the planned squeeze on public spending.

Object Details

• ISBN: 978-1-80103-113-4
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFS Report ; No. R235

Classification and Topics

• Classification: Wirtschaft
• Subject: Savings ; pensions and wealth ; Taxes and benefits ; Income taxes ; Tax ; Private pensions ; Taxes on wealth and spending ; Wealth

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Adam, Stuart ; Delestre, Isaac ; Emmerson, Carl ; Sturrock, David
• Event: Veröffentlichung
• (who): Institute for Fiscal Studies (IFS)
• (where): London
• (when): 2022

Further information

• DOI: doi:10.1920/re.ifs.2022.0235
• Handle: http://hdl.handle.net/10419/282907
• Last update: 10.03.2025, 11:43 AM CET