Assisted suicide legislation risks tax pressure on terminally ill pensioners

Terminally ill pensioners may feel pressured to end their lives early to spare loved ones hefty tax bills, experts warn. Current rules allow pensions to pass tax-free if the holder dies before age 75. Legalising assisted suicide could force terminally ill individuals to choose between extending their lives or avoiding significant financial burdens for their families.

Pensions specialist Andrew Tully described the situation as a “cliff-edge,” explaining that pensions inherited after age 75 could be taxed up to 45%, potentially costing beneficiaries hundreds of thousands of pounds. For example, inheriting a £500,000 pension after the age limit could incur a £225,000 tax bill, compared to no tax if the holder died earlier.

Recent parliamentary approval of assisted suicide, allowing those with less than six months to live to end their lives voluntarily, adds complexity. Under proposed laws, two doctors and a High Court judge must confirm eligibility, but the individual would decide the timing, possibly weighing tax implications against life extension.

Mike Ambery of Standard Life emphasised the need for safeguards to prevent financial factors from influencing decisions, noting the broader implications for estate planning and death benefits.

From April 2027, pensions will also be included in inheritance tax calculations, potentially increasing tax rates on unspent pensions to as much as 91%. This change could further complicate financial planning for grieving families.