'Death tax' spending spree risk for OAPs

LABOUR'S "pensions death tax" will be "disastrous" and leave the elderly dependent on the state, experts have warned.

- David Williamson

There is horror at the Government's Budget decision to end the inheritance tax exemption for unused pension pots.

It is feared people will now spend their pension cash early to avoid a tax raid by the Treasury when they die.

And by underestimating their life expectancy they could end up with little to live on in their old age.

Former pensions minister Baroness Altmann warned: "The incentive now - without any shadow of a doubt - is to spend your pension money as soon as you can." She said Labour's decision smacked of the "politics of envy", adding: "It is short-sighted, ideologically driven policy-making that will have, I believe, damaging consequences for the economy and for individuals." Under present rules, inheritance tax of 40 per cent is paid on a deceased person's assets above the £325,000 threshold.

Money saved in a pension does not count towards this but that will change from April 2027.

Baroness Altmann said: "You've got a pension death tax now." John O'Connell, chief executive of the TaxPayers' Alliance, said: "It will absolutely shock taxpayers to their core that the Chancellor has decided to find ways to extend rather than trim back the detested death tax.