Inheritance tax on pensions could add to probate delays

The number of families waiting over a year for a grant of probate more than doubled over the past three years, and that figure could surge once pensions become liable to inheritance tax (IHT).

In 2023, 1,371 probate cases took more than a year, with 10,103 lasting more than six months. This was a significant increase from 2020, when the corresponding figures were 587 and 3,267 respectively. During the first three months of 2024, 2,722 cases had already been in progress for more than six months.

The statistics were revealed after financial management firm Quilter submitted a Freedom of Information request to the Ministry of Justice.  

Jon Greer, Quilter’s head of retirement policy, warned that delays could get worse once new rules making pensions part of the taxable estate are implemented in 2027.

“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,” he said.

Mr Greer added that the new rules were likely to place additional pressure on families and executors, as they will have to locate and input potentially complex information regarding pensions.

He warned: “Delays may cost families significantly. HMRC proposes charging interest on IHT owed after six months following death, currently at 7.25 per cent. Interest will likely be charged on IHT due from [pension] schemes even where delays are not caused by [families].

“Utilising trusts and making lifetime gifts can help reduce the complexity and potential tax liabilities. Engaging a financial adviser and having a will in place can also ease the process for executors.”

A Ministry of Justice spokesperson said: “Most probate applications are being granted within eight weeks and we are working to reduce waiting times for applicants.

“This includes training our staff to deliver further improvements which has resulted in record numbers of grants being issued in recent months.”