What’s wrong with life assurance paying your tax?

Posted on March 22, 2026 by henry tapper

Yesterday I published a simple article about employers being able to pay for assurance that pays if you die when employed (in service). You can read it from this link

Some people need to take out assurance for themselves. Maybe they want it to stay in place longer than they want or can stay in service.

Whole-of-life cases pay out when the policyholder dies and are often used to cover a future tax liability.

Mary McDougall and Emma Dunkley tell us..

The number processed by wealth manager Evelyn Partners rose by 66 per cent last year compared with 2025, while Royal London’s insurance arm sold 50 per cent more of the policies over the same period.

If you put the policy under the right kind of trust, it will pay out – outside your estate.

“The size of the sums assured has increased dramatically,” said Ian Dyall, head of estate planning at Evelyn Partners. “We are currently helping a number of clients with liabilities in excess of £10mn.”

Some of these assurances will have a big sum assured!

If you want a tax free pay out independent of your employer you can’t individually get tax relief on your policy, If you want your personal pension pot to pay your bill you get tax relief on the way in (and investment growth) but your estate will have to pay inheritance tax on its pay-out.

Put like this, it looks like the people who are winning out of all this are insurance companies. They write the whole of life policies (and some term assurance to cover the period till the gift tax ratchet wears out). They write a lot of DC pension business and of course they underwrite death in service assurance.

“Inheritance tax planning has absolutely exploded,” said Barry O’Dwyer, chief executive of Royal London, adding that “by far” the easiest way to plan for inheritance tax was to buy life insurance that pays out on death.

While there are a few super-rich people who leave a £10m IHT bill behind them, the amounts of people who have not spent their pension pot is higher

The government estimates its proposals will bring about 1.5 per cent more estates within the scope of death duties in 2027-28, on top of the 4 per cent that already exceed the £325,000 nil-rate band, which can rise to £500,000 where a property is passed on. The move is forecast to raise £1.5bn a year for the Treasury by 2030.

Higher, but like most of the tweaks to pension tax, not that big. Like the row about “mandation”, this is more about principle than practice.

Perhaps the best thing that the rich should do is buy an annuity , invest in a CDC pension or exchange their pot for a public sector index-linked pension, if they are newly into service in the NHS, LGPS, Civil Service or (dare I say it) , the Pensions Regulator.

Your pension could pay your life insurance contributions each month. Better still your employer’s death in service benefit, could mean your estate could makes a lot out of your passing with the whole of life and death in service giving your beneficiaries a bonanza.

“Life insurance has exploded!”

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Inheritance tax and Death in Service Benefits

Posted on March 21, 2026 by henry tapper

I tend to trust material coming from First Actuarial. It is simple and clear.

It’s good to see a note on social media on a topic that created uncertainty for millions of workers whose dependents will get a lump sum without threat of tax if they die while employed by a company that offers “death in service.

The value of death in service payments is not recognised till a payment is paid out and then it is an unexpected benefit to a family. It was not right that the value of that benefit could become part of a tricky discussion with the revenue over whether tax might be due.

Many people get this defined benefit but are not , nor ever were accruing pension sponsored by the employer offering them life insurance.  Many save into DC arrangements and if they die will have a pot that may trigger a pot. Those building up a pension in a DB or CDC scheme that pays a pension (to a spouse or partner) should not see that pension become part of the estate assessed for inheritance tax .

There is of course a taxation problem for the well off saving into a DC pot but it may be that moving to CDC assuages that worry (so long as the CDC pays a dependent’s pension).

For First Actuarial and advisers and administrators, the situation is easier too.

I like the sentiment from Lee French and from First Actuarial. It is important that we think of pensions as protection for those who live and life assurance as protection for those who live on when  the earner has departed.

 

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Should we have to turn pots into a pension? Sharp minds struggle with Bill Sharpe’s problem!

Posted on March 21, 2026 by henry tapper

For the past 10 years I have struggled with a pension pot that I cannot turn into a pension . I do not want an annuity, it is not a good deal.

I spent two years working with Pension Superfund to set up a Pension Superhaven , developing a pension scheme where folk like me could convert my pot into an occupational pension. Pension SuperHaven was a kind of pension superfund for  retail customers like me wanting a pension not a pot. We failed, it failed and customers like me still have no pension but just pots!

Here is L&G on the subject.

Building simpler retirement options with CDC

It simply shouldn’t have happened:-  millions of us finding ourselves at retirement with a pot not a pension.

L&G’s spokesperson is Jayesh Patel. Ironically, he finds his article beside the most popular article on Corporate Adviser! My argument  is that we should never have had pension pots in the first place!

Nice to see John Greenwood’s Pension Mutual report most popular on the Corporate Adviser site

The familiar answer to inadequacy is for us to save more but isn’t there another way?

The insurer’s answer is for us to better fund our pots better, “addressing under saving for retirement” is the expensive way but it does not resolve the problem.

The Government are saying that swapping pots for pensions using a whole of life CDC pension could improve the pension people get at retirement by up to 60%. Not only does that help people address under-saving (making the bar lower) but it addresses Jayesh’s problem at retirement.

Doesn’t the pot to pension problem needs to be resolved before we get to retirement?

I could not resolve the “pot to pension” problem with Pension Superhaven. It’s not going to be easy for DC schemes to give members pensions at retirement.  Jay explains how hard it will be for DC providers to get people like me to choose to swap  pots for something else.

Retirement is extraordinarily complex for members. At the same time as navigating profound changes in their personal lives, they must also manage a myriad of financial decisions: where to invest, when to take income or cash, how much to withdraw, how the state pension fits in, and how to avoid unintended consequences, such as triggering higher tax rates or losing entitlement to state benefits.

It’s no surprise that Nobel Prize–winning economist Professor William F. Sharpe described the challenge of turning a pot of money into retirement income as “the nastiest, hardest problem in finance”.  This is why there is demand for simpler income options at retirement.

There is another way than trying to turn pot to retirement income

Muntazir (Monty Hadidi) is head of Pensions at First Bus  head of  UK Pensions Strategy, Governance and Member Engagement.  He is quoted in this IPE article as staying open minded

His problem is that his large workforce are expecting pensions but getting pots and that is causing them a problem. The view he has is that CDC does not give people headaches with “pension pots”. For him, CDC pensions are accumulated over lifetime and are what people engage with.  He hints that in future that may be the way for people to swap pay deductions not for pots but pension!

Of course, cutting the individual pot out of the equation is difficult for commercial DC master trusts . It means unwinding 40 years of relentless pot-building  into pensions. That is the situation we have now and Monty’s asking for the UK to “stay open minded” to CDC so another generation doesn’t find itself with the problem I and my generation has!

I suspect it’s not just  Monty Hadidi  and Jayesh Patel who are waking up to Bill Sharpe’s “greatest problem”!

Monty
Jay

 

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Things that the FCA are doing to help people in retirement

Posted on March 21, 2026 by henry tapper

Jim Boyd is a firm advocate for those in later life, here he is explaining how the FCA is helping (thanks for pointing us to Jim, Tom McPhail)

I am of a generation who has used a later life mortgage to ensure the happiness of my parents and my wider family. I had Jim Boyd’s help and encouragement to do this and know that he is doing great things on the debt side, to enable those with property but little liquidity to live decent lives as they get really old. I was helped by an advisor who understood our family’s problems and by an insurer (Aviva) who have been excellent.

 

Thanks to the Equity Release Council and  FCA for the help they bring to the elderly with equity in property

The FCA run a well regulated market and are looking to go further.

Here is the first part of the study into later life mortgages, which I can recommend to people with the issues my family had. Tom , Jim and Nikhil Radhi, thank you. I include here the introduction and market overview (sections 1 and 2 respectively).

 

Introduction

Market overview

 

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The Pensions Mutual CDC proposal – Will Hutton

Posted on March 21, 2026 by henry tapper

Will Hutton – political economist.

Within 12 months British employers will be able to work together to provide pensions for their staff through CDC pension plans

I support Henry Tapper and the founders of Pensions Mutual who will make it easy for employers to provide staff with pension at a fixed cost.

The Pensions Mutual they have created is a multi-stakeholder cooperative society incorporating many of the principles that I hold dear.

Its mutual structure allows it to become majority owned by the employers participating. It gives them input to the management and investment of the scheme and it allows them to benefit from participation as farmers do from dairies.

The aim of CDC is to make pensions simple and cost effective. I am impressed that Pensions Mutual is inclusive of bright professionals who have clarity of what is needed to deliver to the market a CDC product that can be authorised in 2026 and available to employers early in 2027.

The CDC scheme they are planning has already promises from employers of assets from transfers and future contributions and I have no doubt that an open pension that can neither be in deficit or surplus will be able to invest for the long term in real assets in the UK and abroad.

From an economic point of view, Pensions Mutual is a way to deliver what pensions have been missing this century, a clear sense of purpose.

I am impressed by their wish to embrace new technology to deliver service to employers and their staff to the standards now expected. They talk of a new way of working since AI has become available. As a new enterprise they are well placed to benefit from the opportunity.

So I see this venture as worthy of your attention and investment. That investment can be of your time and expertise, your defined contributions into pensions or the investment of your capital. It may be that you want to invest in all these ways.

I hope that you can move forward with Pensions Mutual in 2026 and that in 2027 and beyond, you will be part of its operations

 

Will Hutton

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“Well said Maggie!” An elderly trustee chair speaks out for Maggie Rodger, the AMNT and independence

Posted on March 20, 2026 by henry tapper

PensionsOldie has spoken out in a comment to my blog on trustees being for members not just compliance

The reference to Maggie’s Farm does not refer to Maggie Rodger but to the rubbish workplace that Bob Dylan imagines himself in because there is no one standing up for him!

We can all feel that way when it comes to our pensions and I hope that that will change when Mutuals return and they are run by trustees that are  enthusiastic about what they do.

Well, I try my best to be just like I am
But everybody wants you to be just like them
They say, “Sing while you slave,” and I just get bored

Pension Oldie’s comment

When I first became a Secretary to a Trustee Board in the mid 1980s I was advised that the first key duty of a Trustee was to act in the interest of members, the second key duty was to question and challenge their advisors and not just to rubber stamp advice.  These messages appear to have been lost over the following decades and replaced with a group think mentality and regulations that have embedded a belief that consideration of members’ interests must be solely determined by an analysis of risks.

I strongly belief that it was this false risk dominated approach that has resulted in many DB pensions schemes giving away a third of their assets by adopting an LDI investment policy or buying bulk purchase annuities based on a negative real gilt yield.  What was the real downside risk which these arrangements were promoted as protecting against; when the pricing was based on the assumption that the scheme would if continuing without the LDI or buy-out “protection” would have real investment losses (at say 2% p.a.) in every future year?  Similarly is it currently in the Members’ interest in a scheme in surplus to pay the insurance company premium to buy out liabilities at little more than PPF level benefits?

In Mastertrust DC and CDC do we have, or will have, Trustees who will have the courage of their convictions to sack the asset manager, scheme provider or owner, if they believe it is the members’ interest to do so?

We do need trustees, in both DB, DC, and CDC schemes who are not conditioned by training or experience in the status quo and a fear of deviating from the norm.  Member nominated Trustees are an important protection but we must ensure that Trustee boards are not dominated by those whose training and experience limits their perspective.

Although I have relevant profession qualifications, am paid in the role, and have decades of pension trustee board experience, I refuse to categorise myself as a “professional” trustee.

You can see all comments on this post here:
https://henrytapper.com/2026/03/19/trustees-are-for-members-not-just-compliance/#comments

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So you think that your pension was bought out by a gilt-edged insurer?

Posted on March 20, 2026 by henry tapper

All year I have been writing about the security of buy-ins and buy-outs of occupational pensions in the UK by insurers. I am talking in particular about our insurers that are shipping off assets and liabilities to the USA and Bermuda so that the liability to pay us is swapped from UK regulated funds (backed by the PPF) to what the FT is now calling the “Private Credit Binge” of top rated bonds. These top rated bonds are yielding such large amounts that insurers do not need to hold so many of them as they’d have to hold UK corporate bonds and gilts.

To understand the explosion of these new kind of bonds, the ones that back the bulk annuities that pay us like a pension, here’s a chart from the  FT article that I can offer on a free link here.

 

I am out of my depth on fully understanding the mechanics of turning a safe fund into a holding of these “Rated feeders”, but here’s the FT explanation

Let’s begin at the beginning

It’s that last paragraph that has made these rated feeders and CFOs help American insurers clean up buying into and buying out UK pensions. But that’s where we should be concerned. Our pensions are easy meat for US private equity

But “easy” doesn’t mean secure and the names of the big private equity firms who now own insurers such as Just are listed below.

You think you are out of trouble when being bought out by an insurer?

This whole business of rating the value of debt is based on “track record” of the debt managers and it’s worse than that.

So there you are. Our bought out pension money’s being held by insurance companies that really have no idea what’s going on.  Call that “gilt edged”?

 

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I can’t breathe at the “fiduciary” summit – I find the air’s too thin up there.

Posted on March 20, 2026 by henry tapper

Lords strips mandation from Pension Schemes Bill

Infamously, last Thursday, as my friend Tom was being lauded by the shadow SOS, I suggested to the not very crowded meeting in Edinburgh a repeat of David Cameron’s trick with Ros Altmann.

Ros had been made a baroness  and installed into the House of Lords so she could be Pensions Minister for the Government.

I suggested that Helen Whately suggested Tom McPhail be promoted to be a peer and be an unelected pension spokesperson for the Conservative party.

I will not call the Conservatives the opposition as there are several of them but the Tories have found an opportunistic way to get popular with the ABI, Pensions UK , IFS , Steve Webb and especially Tom McPhail.

The Tories pretend  trustee investment of pension funds is impeccable. For them and their high minded friends , mandation is giving the Government a right to pollute fiduciary air  by letting rip a loud and smelly fart. That’s nonsense.

I am delighted to find that this nonsense from the great and good is not making it to the top of the Corporate Adviser’s pops. A rather more pragmatic approach to getting ordinary people up to 60% better pensions is #1.

The lower house may find the whole argument about mandation too boring for them and give the Lords its amendment but I think that unlikely and so does another former Pensions Minister who sounds a little more realistic than the rest of the opposition.

Either way  will make very little difference to most of us  that do not breathe the thin fiduciary air that we pretend’s for them.

Pensions for ordinary people are the payments they spend to go on holiday or buy their groceries. Ordinary people have no regard for the niceties of fiduciary duties.  They want value from the portion of their pay they and their bosses put away for later.

 

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TAS300: “Particularly Delightful Memory” says DWP Minister of State.

Posted on March 20, 2026 by henry tapper

William McGrath has done a great deal to promote TAS300 to help trustees and employers get it right at the point of deciding how a DB scheme proceeds

Regulatory coordination to follow to boost “informed decision making”

The case for maths based run-on v bulk transfer comparisons ahead of strategies being set for DB pension schemes was debated in the House of Lords for the third time on Monday.  Debate extracts attached.

The Baroness Altmann Amendments – strongly backed by knowledgeable members – have been effective.  They can be addressed through coordination between the numerous relevant Regulators and by trustees ensuring they make the fully informed decisions expected of them.

Baroness Sherlock, Minister of State responding for the Government, said during the House of Lords debate:

“The noble Baroness, Lady Altmann, is right to home in on the underpinning goal of these amendments. We want to make sure that trustees continue to take advice on the potential options for their schemes and keep the scheme’s strategy under regular review.

To ensure this, we will continue to work with TPR as it reviews and updates its guidance. We will also engage bodies such as the FCA and, where appropriate, the PRA and the FRC, to ensure alignment across all guidance relating to consideration of alternative options.”

Expect TPR to step up.  TAS300V2.1 (from Financial Reporting Council, the forgotten regulator of actuarial work) has to date been ignored by TPR in its annual Funding Statements, the Funding Code and in Funding and Investment Strategy regulations.  Informed decisions require a realistic, calculated assessment of what is at risk for members and what the inflation protection and value share upsides can be.

Pre-1997 service being covered by PPF and one-off payments being Authorised change the calculations.

Actuarial work has long been subject to very little scrutiny.  Some regulatory coordination through a revised Joint Forum on Actuarial Regulation could go a long way.

C-Suite with its partners have modelling tools and analyses to support informed decision making.

Terrific work by Baroness Altmann.

 

Here is the debate

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Pensions Mutual is looking for trustees for its CDC scheme

Posted on March 19, 2026 by henry tapper

We Are Looking for Trustees

As we move forward with the establishment of the Pensions Mutual Unconnected Multi-Employer CDC scheme we are looking for trustees to sit on the scheme Board.  We are particularly keen to appoint individuals who have experience of the Pension Regulator’s MasterTrust authorisation process and/or practical experience of working with CDC.

Candidates are invited to express their interest and share details of their relevant experience by emailing the scheme CEO at stella@pensionsmutual.co.uk before 2nd April  2026.

http://www.pensionsmutual.co.uk

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