Inheritance Tax: Pensions

Lord Macpherson of Earl's Court Excerpts

Monday 17th November 2025 Lords Chamber

[Lord Livermore (Lab)]

I very much agree with the first part of my noble friend’s question. It is very important to state that the intended purpose of pension savings is to fund retirement. The Government continue to incentivise pension savings, with tax relief on both contributions to pensions and the growth of funds held within a pension scheme. These tax incentives are very significant, costing taxpayers £78 billion a year. It is therefore right, as my noble friend said, that it is important to ensure that these tax reliefs are being used for encouraging savings for retirement, rather than ordinary taxpayers subsidising the wealthy to pass on their wealth free of inheritance tax.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, does the Minister agree that it is an important principle of the tax system that tax reliefs, and therefore tax expenditures, should be tightly drawn? Does he also agree that the point of pension relief is to provide a pension in retirement, and therefore that pension savers should draw down their pension, rather than using it as a device to avoid inheritance tax and to improve the lot of their descendants, rather than themselves?

[Lord Livermore (Lab)]

I do agree with everything the noble Lord said. I enjoyed discussing these matters with him when he was a Treasury official and I was a special adviser. I probably learned a lot of this from him then, so I completely agree with what he said. To repeat, the purpose of pension savings is to fund retirement. If taxpayers are spending £78 billion a year on that, it is very important that it is used for its intended purposes rather than for estate planning, as the noble Lord says.