Pensions experts Quilter is calling for urgent clarification of how the proposed tax change will work, particularly as the measure has only been briefly mentioned as part of new guidance on the removal of the lifetime allowance.

The announcement to charge tax on pensions benefit at marginal rates of tax from 6 April 2024 was made briefly in the guidance about how the lifetime allowance will work and was released as part of Legislation Day on 18 July. This follows the removal of the lifetime allowance cap which removed tax liability on larger pension pots in excess of £1.07m.

The document states that it will be changing the tax treatment of payments of uncrystallised and crystallised lump sum death benefits in the event a pension holder dies under age 75, charging tax at the marginal tax rate. Presumably this was included to offset the loss of tax from the removal of the lifetime allowance but the measure would capture all pension beneficiaries as currently set out.