A pensioner has accused Labour Chancellor Rachel Reeves of “stealing” their retirement after Budget changes left them facing a £640,000 inheritance tax (IHT) bill.
The changes mean pension funds passed on after death will now be treated as part of the deceased person’s estate for IHT purposes.
These inherited pensions will be subject to the standard 40 per cent tax rate above the £325,000 nil-rate band.
The new rules are expected to apply to defined contribution pensions, which are the most common type of pension scheme.
In a letter published by the Telegraph, the 69-year-old retired scientist detailed how the Chancellor’s “dreadful” move has devastated their carefully laid retirement plans.
The pensioner claims the changes have destroyed their life-long plan for a comfortable retirement and ability to leave a legacy for their family.
The Leicester-born pensioner described studying hard at school and becoming the first in their family to attend university.
They went on to have a “long and successful” career as a scientist, retiring at age 60.
The writer, who was unnamed in the open letter, explained they felt “worn out” by their demanding job but were “content” they had “planned and saved wisely” for retirement.
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One pensioner faces a substantial inheritance tax bill following Rachel Reeves’s reforms
GETTY
Previously, the individual had aimed for the kind of retirement their parents never experienced, having carefully followed financial planning guidelines throughout their career.
The pensioner detailed how they had worked diligently to ensure they would be self-sufficient in retirement, without requiring any state support.
Before the Budget, the pensioner revealed they would have faced a £200,000 inheritance tax bill, which they described as “arguably fair”.
However, the new changes mean they now face paying £640,000 in inheritance tax – an increase of £440,000 due to the pension fund changes.
Inheritance tax has been deemed the “worst tax in Britain” GETYY Their children could face paying an additional £360,000 in income tax on the balance they inherit. The pensioner described this double taxation as “gut-wrenchingly unjust”.
They outlined several options to mitigate the tax burden, including drawing down money they don’t need to spend, selling their family home, giving it to their children, or emigrating “to save a fortune”.
The letter also highlighted a “sinister” element where dying before April 2027 would make their pension worth £800,000 more.
The pensioner’s letter outlined a deeply personal background to their financial planning.
Their father died in 1965 at just 45 years old, following a “long, painful, and courageous fight with cancer”.
The writer was only 10 years old when they watched their father die in their front room.
As a result, their mother was left to raise four children aged between one and 12 years old, without a husband or job.
According to the pensioner, their World War II veteran father instilled key virtues in them before his death.
These included “hard work, determination, honesty, integrity, respect, aspiration, and an ability to stand on one’s own two feet”. The pensioner noted they had tried to follow this guidance throughout their life.
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Pensioners are finding themselves with not enough saved for retirement GETTY The pensioner noted they had tried to follow this guidance throughout their life. They concluded their letter with a stark assessment of the Budget’s impact on their retirement plans.
“Until your Budget, it had all been worthwhile; I’d enjoy my retirement and leave a legacy for my family, something my parents couldn’t do,” they stated.
They argued the state had “already taken its pound of flesh” after a lifetime of paying taxes. The letter ended with a direct criticism of the Chancellor’s policy.
“That has been stolen by a Budget that effectively punishes people for following the rules of working hard and saving diligently for retirement so that the state does not have to spend a penny to support them – someone who’s self-sufficient, to the very end,” they wrote.
The pensioner noted that despite their working-class background, they had voted Labour all their life.
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