Spring Forecast Statement

Baroness Fairhead Excerpts

Tuesday 17th March 2026 Lords Chamber

[Baroness Fairhead (CB)]

My Lords, I too congratulate the noble Lord, Lord St John of Bletso, on his long, stylish and meaningful service to this House. I wish him well in the future, be he in Africa or anywhere else in the world.

I stand before your Lordships as a member of the Finance Bill Sub-Committee, ably chaired by the noble Lord, Lord Liddle, in his sub-committee chairing debut. I will restrict my comments to the key findings of the committee regarding the inclusion of unused pensions and death benefits in the scope of IHT from April 2027. That will, as the noble Lord has said, make PRs personally liable for paying any tax due within six months of death or incurring a 7.7% increase for interest, with minimal exceptions.

I will confine myself to the practical issues that the Bill raises, which, in the words of one of the witnesses, the noble Baroness, Lady Altmann, speaking in her capacity as an independent pensions expert, will create

“massive chaos and misery to so many people, at a particularly difficult time of bereavement”.

I recognise and welcome the Government’s changes, but they are not remotely sufficient.

Adam Smith outlined four enduring canons of taxation which I will paraphrase as fairness, predictability, ease of payment and cost efficiency. The current implementation plan fails each of these. First, on fairness, after listening to the concerns of the pension scheme administrators, the Government shifted the burden of payment to PRs—not just professional PRs but lay PRs, who are often family members undertaking the task at a grim time in their lives. Personal representatives will be required to contact the relevant PSAs for information to determine exactly what tax is due. As today people retire with, on average, eight to 10 pension schemes, the scale of the task is potentially enormous. In simple cases, six months should be achievable. However, in complex cases, where probate is delayed, which can take years, it simply is not, particularly when many PSAs will not disclose the information until after the probate is granted. That is a Catch-22 situation. Often, personal representatives will not even have control of the assets of the deceased, which makes it difficult for them to pay on time. Charging interest to PRs for such late payments could fairly be regarded as a penalty for taking on the task.

I turn to predictability and ease of payments, which I group together. Many pension assets are illiquid. Their valuation is unlikely to be predictable or certain, given their complexity and the valuation bottlenecks that must surely arise. For example, the current rules for defined contribution and defined benefit schemes are complex and inconsistent. It is possible that schemes with exactly the same financial outcome can lead to the IHT being payable on DC schemes but not on DB schemes. Think about that. An unintended consequence could be that people are discouraged from investing for their retirement through DC schemes, which is counter to policy and to the desire of this and many other Governments.

In many cases, the PRs will need to recover payment from resistant beneficiaries who have already been paid. These beneficiaries might even come from previous relationships or families of the deceased. You can imagine the strain that that would put on being able to make that payment within six months. Many witnesses believe that the industry is not ready and that, should the regulations be laid out just before April next year, the unpreparedness is almost inevitable.

Finally, on cost effectiveness, the changes will increase admin costs materially, whether or not IHT is ultimately payable, as PRs are likely to require the support and guidance of advisers. Personal liability and admin difficulties may well discourage even professional PRs from serving, leaving HMRC to administer even more estates, substantially increasing government costs.

The Investing and Saving Alliance described the proposal as like

“trying to hammer a square peg into a round hole”.

Given the scale and complexity of the task, this change is being introduced without adequate notice, guidance or communication.

There are many ways the Government could improve implementation, such as safe harbours, grace periods from interest or by improving access to information or ways of payment. At a minimum, the Government should publish timely step-by-step guidance to PRs, with worked examples and clear guidance to the industry.

I urge the Government to do more and pose a couple of questions to the Minister. Would the Government consider pushing back the timeline until the most significant of these issues are resolved? If not, what further actions are they prepared to undertake to ease this unfair burden on personal representatives?