Pensions IHT changes to exacerbate probate issues

The change to the treatment of pensions under inheritance tax rules due to take force from 2027 will exacerbate existing delays in probate cases, according to a report from wealth manager and Financial Planner Quilter. The number of probate cases taking over a year to be granted has risen by 134% over the last three years, according to data obtained from the Ministry of Justice (MOJ) by Quilter. This increase in wait time comes as the government prepares to make pensions liable to inheritance tax (IHT) which could further delay the grant of probate in many cases, according to the report from the wealth manager. The number of probate cases taking between 21 and 23 months to be granted has also risen by 132%, according to the MOJ data, highlighting the ongoing strain on the probate process even before pension wealth becomes part of the process in April 2027. There were more probate cases taking between 21 and 23 months to be granted in the first quarter of 2024 (65) than there was in the entirety of 2020 (57). A grant of probate should usually be obtained within 16 weeks of submitting an application, according to the government. It is a legal document that confirms the authority of the executor named in a deceased person’s will to manage and distribute their estate according to the will’s terms. It is required in many cases to access the deceased’s assets, such as bank accounts, property, and investments. Jon Greer, head of retirement policy at Quilter, said that delays to probate grants are already causing significant issues for grieving families and are likely to worsen from 2027. He said: "Under the current set of rules, we are already witnessing huge delays in granting probate causing significant stress for grieving families. With pensions set to become part of the taxable estate from April 2027, the situation is only likely to worsen. “Pension schemes often remain unaware of a member's death immediately, delaying legal and tax processes. This means legal personal representatives will face an even greater burden, consolidating information across multiple pension schemes. “These delays and added responsibilities compound an already difficult situation. Executors, often close kin or friends, will need to input detailed information, adding complexity to an already time-intensive task. Pension schemes will have to decide whether to continue with discretionary processes for identifying beneficiaries, which can add significant time. “Moreover, delays may cost families significantly. HMRC proposes charging interest on IHT owed after six months following death, currently at 7.25%. Interest will likely be charged on IHT due from schemes even where delays are not caused by them, quickly mounting up.” Length of time taken to grant probate Year Over 6 months Over 9 months Over a year Over 18 months Between 21 and 23 months 2020 3,267 1,670 587 122 57 2023 10,103 4,392 1,371 259 132 2024 (January - March) 2,722 1,425 490 124 64 Percentage change (2020-2023) 0 0 0 0 0 Source: Ministry of Justice data analysed by Quilter 16 January 2025 According to a separate recent report from Flagstone, the majority (95%) of financial advisers believe that the incoming inheritance tax liability on pensions is their clients’ greatest current financial concern.

Pensions IHT changes to exacerbate probate issues

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