We are all working out how we are going to be affected by the things in the Budget. One of the measures was bringing death benefits into the scope of Inheritance tax. This tax affects around 4% of estates currently and after the new arrangements this is expected to rise by 1.5%.  

We asked the Cabinet Office how this would affect the civil service pension scheme.  The proposed approach includes lump sum death benefits from defined benefit schemes, like the Death In Service payment from the Civil Service Pension Scheme, and means that they will be included within the value of a person’s estate for inheritance tax purposes.  However, the proposals do not include pensions for survivors (spouses, partners and other dependants).

The Government is consulting on how the proposed arrangements will work, and we expect implementation in April 2027.

It is worth highlighting at this point that there is an exemption under inheritance tax regulations which means that transfers between spouses and civil partners are exempt from inheritance tax except in a very limited number of cases.