Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what assessment they have made of the increasing number of Long Term Asset Funds and the risks they pose to investors, including forced sales or the inability to redeem investments, due to their holdings of illiquid investments.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
The Government wants to make sure that those who have the ability to put away money for the long-term can do so. The Long-Term Asset Fund (LTAF) provides investors with the opportunity to invest in long-term alternative assets, such as venture capital, private equity, real estate and infrastructure, that can offer higher returns in exchange for limited liquidity.
The Financial Conduct Authority have designed robust governance requirements for the LTAF, so investors who understand the risks of investing in long‑term less liquid assets are able to invest with confidence. Where a firm markets an LTAF to a retail investor, the firm must provide appropriate risk warnings and conduct an appropriateness assessment.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what plans they have to extend the current period of six months after the death of the individual within which inheritance tax must be paid and after which interest starts to accrue.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Most unused pension funds and death benefits payable from a pension will form part of a person’s estate for inheritance tax purposes from 6 April 2027. This removes distortions which have led to pensions being openly used and marketed as a tax planning vehicle to transfer wealth, rather than as a way to fund retirement. These reforms also remove inconsistencies in the inheritance tax treatment of different types of pensions.
Inheritance tax should be paid within 6 months from the end of the month after the date of death, or late payment interest will begin to accrue on the outstanding tax. This is a longstanding requirement that ensures the tax is collected quickly and efficiently. However, the Government recognises the difficulties personal representatives may face in paying the inheritance tax due and offers several payment options to help. This includes the direct payment scheme, which allows personal representatives to instruct banks and building societies to transfer funds from the deceased’s bank or building accounts before probate is granted.
The Government also announced changes at the Budget in November 2025 which mitigate the risks to personal representatives by providing them with the ability to direct pension scheme administrators to withhold taxable benefits for up to 15 months from the date of death and to direct them to make payments of inheritance tax directly to HMRC. The changes also protect personal representatives from risk that lost pension pots emerge later by discharging them from liability where they have received clearance from HMRC. Furthermore, to ensure that the process of calculating, reporting and paying inheritance tax does not take longer than necessary, the Government will introduce regulations setting out deadlines for the parties involved to exchange information.
These changes are consistent with the process which already exists for administering estates and paying any inheritance tax due. Personal representatives are already responsible for administering the rest of the estate, including non-discretionary pension schemes which are already in scope of inheritance tax. The Government will publish further guidance and tools to support personal representatives in readiness for these changes being implemented in 2027.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what steps they are taking to ease the administrative burden on personal representatives responsible for assessing and paying inheritance tax on unused pensions due within six months of death.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Most unused pension funds and death benefits payable from a pension will form part of a person’s estate for inheritance tax purposes from 6 April 2027. This removes distortions which have led to pensions being openly used and marketed as a tax planning vehicle to transfer wealth, rather than as a way to fund retirement. These reforms also remove inconsistencies in the inheritance tax treatment of different types of pensions.
Inheritance tax should be paid within 6 months from the end of the month after the date of death, or late payment interest will begin to accrue on the outstanding tax. This is a longstanding requirement that ensures the tax is collected quickly and efficiently. However, the Government recognises the difficulties personal representatives may face in paying the inheritance tax due and offers several payment options to help. This includes the direct payment scheme, which allows personal representatives to instruct banks and building societies to transfer funds from the deceased’s bank or building accounts before probate is granted.
The Government also announced changes at the Budget in November 2025 which mitigate the risks to personal representatives by providing them with the ability to direct pension scheme administrators to withhold taxable benefits for up to 15 months from the date of death and to direct them to make payments of inheritance tax directly to HMRC. The changes also protect personal representatives from risk that lost pension pots emerge later by discharging them from liability where they have received clearance from HMRC. Furthermore, to ensure that the process of calculating, reporting and paying inheritance tax does not take longer than necessary, the Government will introduce regulations setting out deadlines for the parties involved to exchange information.
These changes are consistent with the process which already exists for administering estates and paying any inheritance tax due. Personal representatives are already responsible for administering the rest of the estate, including non-discretionary pension schemes which are already in scope of inheritance tax. The Government will publish further guidance and tools to support personal representatives in readiness for these changes being implemented in 2027.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what analysis they have carried out to support the exclusion of UK listed investment funds as qualifying assets under the Pension Schemes Bill.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
The scope of the qualifying assets provisions in the Bill’s asset allocation reserve powers are designed to reflect the scope of the Mansion House Accord, a voluntary expression of intent by seventeen major pension providers to invest 10% of their main defined contribution default funds in private markets, including 5% in UK private markets.
This reflects the Government’s intention that the reserve powers should not be open-ended but should be capable of serving as a limited backstop to the commitments made in the Mansion House Accord.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what estimate they have made of the impact of specifically levying (1) 10 per cent or (2) 20 per cent on unused pensions at death, instead of requiring the pension fund to be administered as part of the person's estate for inheritance tax purposes.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Most unused pension funds and death benefits payable from a pension will form part of a person’s estate for inheritance tax purposes from 6 April 2027. This removes distortions from changes that have been made to pensions tax policy over the last decade, which have led to pensions being openly used and marketed as a tax planning vehicle to transfer wealth, rather than as a way to fund retirement. These reforms also remove inconsistencies in the inheritance tax treatment of different types of pensions.
A flat rate tax charge would be a very different policy with very different impacts. Fewer than 10% of estates annually are forecast to have an inheritance tax liability in the coming years. A flat rate tax charge on pensions would impact a different, and large, population of individuals below the current inheritance tax thresholds. This approach would not be equitable as it would require the majority of estates to pay more so that a small share of estates could pay less.
If the flat rate is set at a lower rate than the current rate of inheritance tax, this would lead to unused pension funds being taxed more lightly than other assets subject to inheritance tax at a rate of 40%. This would likely mean that pensions would continue to be used as a tax planning vehicle for the wealthiest individuals.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what estimate they have made of the proportion of (1) defined contribution, and (2) defined benefit, pension schemes that use salary sacrifice for auto-enrolled workers.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Whilst the government does not currently hold these figures, 39% of employers offer salary sacrifice and 35% of employees use it. We would expect that the vast majority of pension schemes using salary sacrifice include workers covered by pensions automatic enrolment. Automatic enrolment applies to workers aged between 22 and the State Pension age and earning at least £10,000 a year. The latest figures indicate that the majority (94%) of employees using salary sacrifice are eligible for auto-enrolment.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government whether they plan to make changes to tax and National insurance reliefs for salary sacrifice pension arrangements; and if so, what estimate they have made of the cost to employers, in particular in regard to the cost of changing payroll processes and renegotiating employment contracts.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
The Government keeps all taxes under review as part of the policy making process. The Chancellor will announce any changes to the tax system at fiscal events in the usual way.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government, further to the Written Answer by Lord Livermore on 6 November (HL11291), what were the annual costs of the tax exemption of income receipts and capital gains in pension funds in the past three years.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Estimates of Income Tax relief on pension contributions can be found in Table 6 of the Private Pension Statistics publication. [1]
Table 6 summary: Estimated cost of pension Income Tax and National Insurance contribution (NIC) relief (£million) | |||
| 2021 to 2022 tax year [revised] | 2022 to 2023 tax year [revised] | 2023 to 2024 tax year [provisional] |
Total pension Income Tax relief | 45,300 | 47,800 | 54,200 |
- of which on Net Pay Arrangement contributions by employees | 5,100 | 5,500 | 6,200 |
- of which on Net Pay Arrangement contributions by employers | 16,100 | 17,400 | 20,800 |
- of which on Relief at Source scheme contributions by employees | 3,600 | 3,900 | 4,400 |
- of which on Relief at Source scheme contributions by self-employed individuals | 800 | 800 | 1,000 |
- of which on Relief at Source scheme contributions by employers | 5,900 | 6,700 | 8,100 |
- of which on Salary Sacrificed contributions by employees | 5,100 | 6,000 | 7,200 |
- of which on Deficit Reduction Contributions by employers | 4,300 | 3,100 | 2,100 |
Figures are in £ million and rounded to the nearest £100 million.
The column totals may not equal the sum of the individual components due to rounding.
HMRC does not hold data on the cost of the tax exemption of capital gains in pension funds.
[1] This publication can be access via the following link: https://www.gov.uk/government/statistics/personal-and-stakeholder-pensions-statistics