Ros Altmann: Will a new leader keep pushing flawed policies?

With a new prime minister in place, what measures might we expect as he searches for extra revenue? Sadly, I fear anyone interested in Money Marketing and investment matters could be facing further bad news.

There has been a clear shift in fiscal policy – hitting businesses, wealth creators and people who have assets such as Isas, pensions and homes.

Freezing tax thresholds and restricting pensions tax reliefs are a danger to future pensions, and there are serious disincentives for those with middle or upper middle earnings as increasing numbers of people are caught by the personal allowance withdrawal trap.

Tax changes so far have been driven by ideology, rather than sound economic logic. In this vein, rumours of a significant rise in capital gains tax, further reductions in pension tax-advantages, restrictions on Isas or a wealth tax could become reality.

This same ideology could mean more measures to raise money from those who have died.

Of course, the administration of someone’s estate is already a big money-spinner for the Treasury. Aside from 40% inheritance tax and taxes on lifetime gifts, there are other charges levied on estates. The recent 75% increase in probate fees, from £300 to £526, payable by one in two bereaved families, will be another nice earner.

Families trying to deal with a loved one’s estate often find out the hard way that the system is stacked against them

Families trying to deal with a loved one’s estate often find out the hard way that the system is stacked against them. Even professionals suggest the system feels like a scam, in the way the tax rules are set up.

Inheritance tax of 40% of the value of all estate assets is due within six months of death. But until probate is granted – which generally takes months – the estate is frozen. So most assets, especially the family home and other property, cannot be sold and bank accounts or investments may not be released, leaving the executors unable to raise money to cover the tax payment due.

Then, to add insult to injury, when the money is not paid on time because the rules make it impossible, the Treasury charges around 8% interest on late payments.

Until you’ve struggled with the mind-boggling complexities of administering a loved one’s estate, you probably won’t realise just how unfair and punishing it can be.

Ros Altmann: The Government’s IHT plan risks chaos for pensions

Adding pensions to this complex web of requirements next year will just make the unfairness and complexity worse. The dreadful decision to impose inheritance tax on unused pensions, which will also be further taxed at up to 45% when withdrawn by the inheritor, will mean more estates having to navigate the IHT quagmire.

I predict that the current plans for charging inheritance tax on pensions will simply be unworkable.

They will result in lay executors and personal representatives, who may know nothing about pensions at all and not even be familiar with the terms used on a pension statement, being unable to settle the tax on time, facing penalties and interest for late payments, and even being sued by the beneficiaries.

There will not even be permission to phase the tax payments over ten years, as applies to the sale of property. Of course, the ten-year rule still requires interest to be paid on the amounts owed after six months, but no penalties.

Pensions could help revive British companies and markets, but retrospective, punitive tax changes will undermine this success

With inherited pensions, especially if they hold illiquid assets, or business property, the difficulties and costs could be enormous. People are bound to pay less into their pensions and withdraw the money much sooner than they otherwise would, which will reverse the improvements in pensions we have seen since 2016.

At a time when the country needs much higher growth, these ideological new tax measures are more likely to weaken the economy. Pensions could help revive British companies and markets, but retrospective, punitive tax changes will undermine this success.

It is not too late for the Government to reconsider its plans. A flat-rate tax on unused pensions would be much fairer and easier to administer. It might even raise extra revenue. I hope they will listen to these warnings and change the current plans.

Ros Altmann was pensions minister 2015-16 and is a member of the House of Lords