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Rachel Reeves' IHT raid on pensions "unfairly targets unmarried couples"

Journalist: Scott Gallacher, Newspage Newsdesk

ended 11. January 2025

The 2024 Budget’s introduction of Inheritance Tax (IHT) on pensions has ignited controversy for its unfair impact on unmarried couples. While married couples and civil partners benefit from the interspousal exemption, unmarried partners are hit with a tax burden that could strip away significant portions of their pensions after a partner's death.

An Unjust Penalty on Lifelong Partnerships

This policy punishes unmarried couples who share long-term commitments but choose not to marry. At a time of grief and financial insecurity, surviving partners may face devastating tax losses, draining funds they rely on for stability. It’s a stark choice: marry for tax relief or endure an outdated penalty.

A Backward Step in Modern Society

The policy not only imposes financial hardship but also reinforces outdated views, undermining unmarried partnerships in a society that values diversity in relationships. Worse, it risks eroding confidence in pension savings, particularly among unmarried savers, potentially jeopardising retirement security and increasing dependence on the state.

A Call for Reform

This inequitable pension IHT policy demands urgent change. The government must extend the interspousal exemption to all committed couples, ensuring pensions remain a secure asset for everyone—married or not. Anything less is a betrayal of fairness and modern values.

Newspage asked IFAs if they believe this policy reflects today’s relationships. Their views are below.

6 responses from the Newspage community

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Anita Wright
Chartered Financial Planner at Ribble Wealth Management
The main point is that while this policy is meant to raise revenue, it’s being introduced in the most cack-handed way imaginable. It demonstrates an extremely high level of incompetence. The proposed system will be unwieldy, overly complex, and expensive to administer. Even if it manages to pass in its current form, it will cause chaos, disrupting estates, probate, and everything else connected to it. Anyone with a basic understanding of economics would have seen a simpler solution. Let’s not forget, before the Tories abolished it, there was already a tax on pensions. Tony Blair introduced it at a rate of 55%, which was arguably excessive. Why not introduce a straightforward, separate tax on pensions instead? A specific pension tax, unrelated to IHT, could apply a flat rate of, say, 35% on any remaining pension funds after state pension age. It’s simple, effective, and would raise revenue without creating unnecessary complexity. If this had been proposed, it could have been implemented by April 2025, providing a two-year lead time instead of this convoluted mess.
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Scott Gallacher
Director at Rowley Turton
Rachel Reeves' pension IHT raid unfairly targets unmarried couples, creating a stark divide between those who marry and those who don’t. My partner and I have been together for over 20 years, with two children, but didn’t marry because our wedding savings went toward a house deposit in the 1990s to avoid being priced out. Now, my partner faces a six-figure IHT bill on my pensions and death-in-service cover if I die. How can Rachel Reeves justify accusing people like me—who can’t even access their pensions yet—of using them as a vehicle for inheritance tax planning?It’s infuriating because the Higher Income Child Benefit Tax Charge and benefits means-testing already treat married and unmarried couples equally, proving HMRC and the government can apply fair rules when they choose to. So why not here? While celebrity farmers like Clarkson dominate the IHT headlines, let’s not forget there are 3.6 million unmarried couples in the UK—many of whom will be unfairly caught by this policy.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
This is not the only tax benefit that married couples get above and beyond those that are unmarried. However, I think it is important to look at the context of today's relationships and for govenment to question what the "new-normal" is, in conjuction with the stats, whether there should be some exemptions made for unmarried couples, too. This however would bring with it complexities in that there would need to be a definitive cut-off to qualify for this exemption - what would this be and how much ambiguity would it bring?
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Kundan Bhaduri
Entrepreneur, Investor and Landlord at The Kushman Group
Rachel Reeves’ proposed inheritance tax on pensions has sparked fresh controversy, placing unmarried couples in an unenviable position: marry or face a significant financial penalty. While married couples and civil partners enjoy tax-free transfers, long-term partners without legal ties are left to grapple with an unfair burden during their most vulnerable moments.

This policy doesn’t just tax pensions—it taxes personal choice. By ignoring the reality of modern relationships, it risks reinforcing outdated social norms while eroding confidence in pension savings. For unmarried savers, the message is troubling: your commitment only counts if it’s government-approved.

Calls for reform are growing louder, with experts demanding that tax relief be extended to all committed couples—married or not. Anything less risks undermining fairness and retirement security in a society that values diversity in relationships.
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Debbie Porter
Managing Director at Destination Digital Marketing
Labour is supposed to be the party of the common man, and is supposed to be progressive in thought. Discriminating against unmarried people in this way creates an inequity that’s unfathomable in context of Child Benefit assessments that are judged on both parents’ income regardless of marriage status.

I have been happily unmarried for 23 years and have two children from that union. As a couple we agreed that I would give up full-time work in order to raise our children rather than pay exorbitant nursery fees to have somebody else raise them for us. Surely this is the bedrock of society, that we raise good citizens for all of our tomorrows?

In working part-time to raise our children I also forfeited my ability to build up a good pension pot of my own, but our financial planning included my access to my partner’s pension. Inevitably one of us will die first, and if he should be the one to die first, I now face being taxed again on that pension pot we’ve both worked hard on to build.
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David Nicklin
SSAS Consultant at Retirement Capital
Reeves' continued plan to plunder pensions is a tax on love, not wealth. Unmarried couples face a grim choice: marry or watch their lifelong savings gutted by unfair IHT. This policy punishes grief, drains pensions and mocks modern partnerships. It’s a relic of outdated thinking, eroding confidence in pensions and pushing savers to the brink. At a time when personal and household debt is mounting, reform on pension planning for partners isn’t optional, it’s essential. The interspousal exemption must apply to all committed couples. Anything less is a betrayal of fairness, freedom and the very purpose of encouraging saving for later life. Let pensions protect, not penalise.