In my last blog I beatified George Osborne for his Budget reforms to the pension rules. However, this month we delve back into his sinful past and reveal an earlier indiscretion, namely the imposition of a 55% tax charge on funds in pension drawdown passed to estates (rather than surviving spouses) on death.

Back in 2011 George decided that the then existing tax rate of 35% was too lenient although I'm sure all the extra tax revenue barely crossed his mind. Now, however, he may have to think again thanks to a saintly campaign launched by Standard Life.

In the words of Standard Life head of customer affairs Julie Hutchison: "We would like to see a simpler and fairer result for people and their families. And we believe this can be achieved by aligning the death benefit tax charge for crystallised funds to the Inheritance Tax (IHT) regime."

If their proposal is accepted it would mean that those with larger estates would see their pension pots subject to a 40% tax charge on death, while those with less might be able to pass their remaining pension funds to their beneficiaries with no tax payable.

This is certainly fairer than a "one size fits all" tax rate of 55%, and we welcome any initiative that reduces the potential tax payable by our clients. However, there is an important consideration if Standard Life's idea is adopted by the Government.

Until now pension funds have not been treated as part of a deceased person's estate but would be under Standard Life's plan, which would mean more estates falling into the IHT net. However, with careful planning it should be possible to mitigate at least some of this potential taxation for those with relatively small estates, whereas those with larger ones will be benefiting from a reduction in tax of at least 27% (15% of 55%) in any case.

Overall, we think this plan makes a lot of sense and is generally good news for consumers. Watch this space to see how the Government responds!

Robin Sainty APFS M.A. (Cantab)