UK employers reassessing death-in-service pension benefits

Changes to inheritance tax in the UK may affect families who rely on a pension benefit that provides cash payouts when a worker dies before retirement. Recent reports show that 90% of employers are reconsidering this "death-in-service" benefit due to upcoming tax changes. Pensions consultancy WTW has found that many of its clients are examining these plans, as the Chancellor plans to subject unused pension funds and death benefits to inheritance tax starting on April 6, 2027. The Firefighters Pension Advisory Scheme has raised concerns that this could lead to significant tax bills for families of fallen members. Kate Smith from Aegon warned that the current inheritance tax system is already complicated. She believes adding pensions to this system will create more issues. She suggests simpler alternatives, like exempting the first £100,000 of unused pensions from the new tax rules. This would also discourage people from depleting their pensions quickly to avoid tax. Helen Perrin of WTW confirmed that employers are adjusting their pension plans in light of these changes. As the Chancellor consults with pension providers, the future of this important benefit hangs in the balance.