If someone dies and those who are left to look after things can’t pay any Inheritance Tax due within 6 months, an interest-rate clock starts ticking. It’s currently 2.5% over base rate, so 7.25% but is going up to 4% over, so 8.75% from April. Effectively another ‘stealth tax’, clocking up at £73 per month for every £10,000 owed. Bear in mind that the sums are often big, and it is often the case that a property is the main asset, which can’t be sold until probate is granted. There might not be any other cash, or certainly not enough, in the estate so, guess what, the only option is to borrow money from the bank to pay the tax to avoid paying interest to HMRC. And when (if? Wishful thinking?) pensions start to be included, the problem and amounts will increase still further. And it will be down to the pension companies to pay the bill on their part of that problem. Good old-fashioned life insurance, cash on death in the right hands, is looking more and more likely to come back into fashion.
“Pensions minister: ‘we have created saving pots, but not a pension system’”
The OBR (Office of Budget Responsibility, as opposed to the OBI, often said to be housed in No.11) said this week that pensions were one of the biggest problems to be faced by this and future governments.
