Sir Steve Webb and Baroness Altmann.

Q78 The Chair: Welcome back to our second panel of the afternoon on this question of the Government’s proposals to impose inheritance tax on pensions. We have here two witnesses who are both very expert and very familiar to us in Baroness Ros Altmann, noted pensions expert, and Sir Steve Webb, who was a very influential Pensions Minister in the coalition Government before he went into the private sector. We have two very good witnesses.

I will start off with a general question that enables you to say whatever you want to say. What is your view of the Government’s proposals to make personal representatives responsible for working out and paying IHT? How practical do you think this is?

Sir Steve Webb: The committee in the previous session heard about the situation of the widow who is left with trying to sort all of this out. Most people who die are quite elderly and most of them leave behind people who are quite elderly. We talk in abstract terms about personal representatives, but often it is a grieving person. As we heard previously, this is someone who the industry would describe as vulnerable and would have processes in place to deal with. We are going to place a huge responsibility on them.

I take the logic that says no individual pension scheme knows the total picture. No individual scheme can know what the IHT bill is because it does not know about the other pensions; it does not know about the house and the bank balance. Somebody has to gather this information together. I kind of get that, but, Chair, you used the phrase “work out”. The analogy that I would draw is with submitting a tax return. I gather information that HMRC may not have—perhaps tax information, information about untaxed income that they do not know about. I report it to them and then they work everything out. It seems to me that we could have a situation where people simply—“simply” is pushing it—assembled the information, as best they could, submitted it and then HMRC contacted all the pension schemes and said, “You need to pay this amount. Here is how to pay it”. All that could be automated.

Again, as the previous evidence session said, HMRC and the pensions industry are going to be doing this every day. Bereaved widows will do this once in their life. We need a system that relies on the bit that is very relatively efficient and familiar. For me, the less we can require of the personal representative in this world, the better. That would be my judgment.

Baroness Altmann: Thank you, Chair. I am really pleased that the committee is looking into this issue. You will have seen from my evidence that I feel I cannot warn strongly enough that this is a disaster waiting to happen, but we still have time to rethink the plans.

In the interest of the future of pensions, I would urge the Government to consider the practicality of what it is trying to impose upon bereaved relatives at a very difficult time in their life. For a spouse, it may not be quite so bad, if a spouse inherits the pension. That may be simple. Children or relatives of someone who has passed away, who may have unwittingly volunteered to be a personal representative and who may have no idea what they are letting themselves in for, will be in for a terrible shock and a significant potential cost and liability upon themselves as a result of what is currently proposed.

I apologise for saying it strongly, but, honestly, if you think about the real world, the majority of people’s estates will not have professional financial advisers and lawyers helping them. We are trying to get millions more people into pensions through auto-enrolment. There will be millions more people who have modest pots, who will be caught up with this, possibly in a way that does not even incur a tax charge but incurs huge costs and work in establishing that they do not have a liability. We know that so many people do not even know what pension funds they have in total. One of the reasons that we are trying to get the pensions dashboard is to try to find old entitlements.

The way that the legislation seems to want to work would mean that someone who may have had nothing to do with pensions in their whole life, who certainly does not understand the jargon, the language and the processes around pensions and who may not have their own pension, will be having to try to find all the pension entitlements that their loved one or whoever it is may have had, when that person themselves did not even know about it, and may have to sign a form saying that they have found all the pensions or something of that nature in order to finalise the estate. If something turns up later, who is liable for them not having found it? Where is the money coming from to pay any tax that might be due, if it tips the estate over into inheritance tax?

It does seriously concern me that the Government’s response to their consultation has completely ruled out what some of the previous witnesses were suggesting, which is a separate system with a kind of unused pension levy. That could be outside the inheritance tax process, which is already unbelievably complicated anyway for many people.

The main reason that the Government want to do this—and I understand this—is because they do not like the idea of very wealthy people passing on large pension funds tax-free as a kind of IHT avoidance mechanism. I get that. There could be an unused pension levy, whether it is 10%, 15%, or 20%—you can pick a number—that applies to all pensions, or you could have a de minimis above which it applies. There would be no complications as far as the PRs are concerned. If there are illiquid assets, it might take time to raise the money, but the money would be in the fund available at some point. It could raise more money than the Government might ultimately find this raises, because the people with the very largest pension funds are going to find ways around all of this.

I am worried about the people who we are trying to get into auto-enrolment now, the upper middle earners and middle earners who might build up a few hundred thousand or a couple of hundred thousand pounds of DC assets over their lifetime, who perhaps pass away unexpectedly young. Suddenly, what they have done will cause immense problems for loved ones, who have suddenly been bereaved and had no idea this was coming. Most people do not know what inheritance tax involves or administering an estate involves. When you have done it, you realise it is and can be a minefield, though not always, obviously.

This would add pensions into the mix when pensions themselves are so complicated. The processes involved, I can just imagine, will cause significant delays and will add cost, liability and risk in a way that I hope the Government and the committee might see does not actually necessarily achieve the objectives but does cause tremendous disruption to DC pensions and may indeed undermine confidence in the future of DC pensions for many people anyway, once these kind of stories hit the headlines, if it goes on.

The Chair: Does the solution that Sir Steve put forward appeal to you?

Sir Steve Webb: Can I defend it before you disagree with me? I have tried to restrain myself a little with the committee, recognising the world in which we live and the scope of your inquiry. I have lots of thoughts and indeed some sympathy with some of Baroness Altmann’s ideas as to how we might do it differently if we were starting from a blank sheet of paper.

My assumption is that the Government are just going to do this thing somehow on 6 April 2027. I value this committee’s inquiry for finding ways to do it in a more humane manner. What I think will happen on 6 April 2027 is journalists will start having to do this for their loved ones, realise it is horrific, will kick up a stuff and then it will all be reformed.

I fear it is going to happen as designed, so I am largely focused on things that could be done to make it better.

The Chair: That is the assumption that we are making in terms of our inquiry.

Sir Steve Webb: Just on the dashboard point, as mentioned previously, it ought to be the answer to the question, “I have to sort out someone’s estate. How do I find all their pensions?” “There is a dashboard”.

There were two points made earlier that it is really important to focus on. First of all, third parties do not have access. They could, but they do not on day one. When I have said this to the dashboard people, they have said, “Just leave us alone. Let’s get the darn thing running. Then we will do other things”. Third-party access should be first on the list, so that somebody other than the deceased can access it.

Secondly, we need to have pensions that have started to be drawn down on the dashboard. At the moment, dashboards are for workers to look at their futures. When you become a pensioner, your pension comes off the dashboard. If it was on, that would make a huge difference to people. It would make a real practical difference.

Baroness Altmann: I absolutely agree with both of those. Again, I have to alert the committee that this will not be ready by 2027. There will not be a practical manner in which you can find somebody’s pensions at that point.

If this goes ahead as it is currently proposed, the idea of having a longer period by which you need to report will be very important. I would argue two years makes sense, given the way pension schemes operate and knowing how processes can go. It is almost impossible to imagine most non-professional and non-experienced PRs being able to do all this within six months and avoid an interest charge.

There is also still a possibility, I hope, of involving the pension schemes more in the process somehow. It looks as if the legislation is going to drive people towards having two wills and two estates so that there is a separate system for your pensions and a separate system for the rest of your estate. That is fine if you have a reasonable sum of pensions. If you have a few small pensions, I do not know quite how that works. Maybe there can be a de minimis, if you are looking for a practical way around some of these problems that are bound to arise. You could delay the whole thing so that we have a reliable dashboard that we can be more confident can be used.

It would be worth the Government modelling whether a flat-rate unused pension levy, paid at any age you pass away at to recover some of the tax relief—I get that—would potentially raise at least as much, if not more, revenue as the current proposals, without this pain. I honestly do not see how they are going to work in practice. I really do not.

Q79 Lord Pitkeathley of Camden Town: To the liquidity point, the Government acknowledge that in some cases PRs will not have sufficient other funds to pay inheritance tax in relation to pensions. What are your views on their suggestions as to how personal representatives can manage liquidity challenges? What else could be done to support personal representatives in this position?

Sir Steve Webb: I have a couple of thoughts. First, I struggle to see why, once a pension scheme knows how much tax is due, we have this complicated business of the beneficiary choosing whether to have the money paid gross or whether the beneficiary wants the scheme to deduct the tax and pay it net and then potentially claim back some income tax on the gross amount. It just seems ridiculously complicated to me.

Once an amount is due and the pension scheme knows its share of the IHT, I cannot see why that is not just deducted automatically. Let us try to remove as many complications, options and variations. The beauty of that is the personal representative then knows that, if the pension has been paid out, it must have had the IHT paid. That is going to make the personal representative’s life easier.

On liquidity, we came up with an idea in our submission. Once you have probate, you can get your hands on the rest of the estate. As we all know, probate sometimes takes a very long time. You could fire the probate starting gun straightaway, get your probate application in and have all the probate process gone through and completed. Then, when everything else is done, you could tell the probate people that everything else is sorted, and probate could be immediately granted. That would be better than only being at the starting gate for the probate race, which then runs for however many months. If that happened, the liquidity programme would be much simpler. Yes, you might have to pay IHT before you would got probate, but you might get probate instantaneously once you have done that. It might be a very short gap.

I have applied for probate myself twice recently. We actually had very swift processes, but I know many people have waited months and months. If we do not sort that out, people are going to be sorting out estates years after someone has died. That would be a very practical way of helping.

Baroness Altmann: The liquidity issue certainly is another potential minefield and risk for PRs because they have no control over the pension. It may be that the only other asset is a house. They cannot get money out of either of those until they have probate. They cannot sell the house until they have probate and they cannot, presumably, liquidate the pension before that. Therefore, they will incur an interest charge.

Will they then be liable for not acting quickly enough on the pension to ensure that the money has come in to avoid the interest? If an estate takes quite a long time, how will that payment be made? At the end of the day, unless a pension fund is turned into cash straightaway, its value will change. The liability will keep changing as the markets change. I do not think you can instruct anyone to cash in the pension because it will be up to the PR and then the beneficiaries.

The other thing that worries me is that there is no provision, even for the beneficiaries who want the scheme-pays option, which has a £4,000 minimum. I do not know who finds the money underneath that £4,000 limit. Not everyone has that kind of sum knocking about.

There is no provision in the legislation for those who are minors or mentally incapacitated to be able to instruct. Again, what happens there? There is an awful lot that we need to think about. How will this work in practice? A pension fund is not a bank account, where there is money there. In most cases, it is assets that may or may not be available and cannot be used until you have gone through the right processes. You need to verify that everything is as it is supposed to be, that the PR is the PR, that they have the responsibility and that the beneficiaries are the beneficiaries, and you need to solve any disputes between the will and the pension expression of wish forms, which may or may not tally and may undermine something in the will.

One can envisage that, in practice, this will bring in significant potential money for the Revenue. One of the things they mention in the consultation is that they do not want to extend the time period, presumably because it might cost money in interest earned, but extending to two years again would be very helpful in this regard.

Q80 Lord Leigh of Hurley: In the situation where a single parent who does not appoint a PR dies relatively early, that is certainly going to be a major disaster that the Government, you would have thought, would not want to see. Do you see this affecting the whole way that people undertake pension planning and savings? If I was advising such a person, I would say, “Do not have a pension. Give the money straight to the kids now. Let them create wealth at a lower income tax rate. Then you will not have this problem when you die”. Could you see a complete change in the way that the savings industry works here on in?

Baroness Altmann: I have serious concerns that this policy will undermine the future of DC pensions. It will make it likely that there is less money going in, more money coming out earlier than it should and less money staying in, all of which undermine the Government’s objectives for the future of pensions and for DC in particular.

The overriding incentive—this is an unintended consequence, I am sure—will now be not to keep money in your pensions for later life, which the current system encourages, but to take money out as soon as you can for fear that you might die. Most people are more worried about dying young than living too long. We know that.

If you get to age 60, you can start taking money out of your pensions. That age may be 57 or whatever. Let us say we have been successful in auto‑enrolment and helping people build up DC pension pots and their investments have done quite well. Let us say someone has £300,000 or £400,000 in their pension fund. Again, I am not worried about the people with £1.5 million, £2 million or whatever. They will be okay. It is these others, for whom pensions are so much more important.

When this person gets to age 60, they may still be working but may not be working as much as before. Let us say they are earning £35,000 a year. They have £400,000 or £300,000. They take £100,000 tax-free cash. They can then take out £15,000 a year from their pension fund straightaway at 20% tax. Let us say that by age 70 they have already taken half the fund or more. Then their income drops. Let us say the average income is about £25,000. They can take another £25,000 a year within six or seven years. By their mid-70s, the money has gone. That is all at 20%. Pensions are supposed to last until your 80s and 90s, which is an idea that the current system encourages.

I accept that the complete tax-free pass-on can be adjusted in the way that I was saying, with a 20% flat-rate levy or something of that nature. That would not encourage people to take the money out quickly. It would not encourage them not to invest for the long term because they want to try to get the money out. They would be more comfortable keeping it in for longer. Again, that is what the Government want DC pensions to do.

I really fear that the industry and policymakers have underestimated the damage that this particular measure could do to the incentives for people to put money in, keep money in and not take money out too soon from pensions. I hope there will be a recognition of that before the damage is done.

Q81 Lord Altrincham: Does this measure treat different types of pension schemes consistently?

Sir Steve Webb: No, it does not. If you think about a traditional defined benefit pension in the private sector, there are three stages. There are the years when you are paying in. If you move on from your company, there are the years when you are what is called a deferred member. You have not retired yet but you are not an active member anymore. Then there are the pensioner years.

If you die when you are an active member, any lump sum benefit or pension is out of IHT. That is one good thing that HMRC has changed in the consultation. That is now out. Death in service is out, which is good. If you die having left the company but not retired, you are what is called a deferred member. Many pension schemes pay a lump sum. That is in. As we understand it, that will be subject to inheritance tax. If you die once you have started drawing the pension and it is just a regular pension, that is not in inheritance tax.

There is this strange group of people who die after leaving a company but before they start drawing the pension. In those cases, the people receiving lump sum death benefits will face inheritance tax when others in the same scheme would not. That is one anomaly. They have half fixed it but not wholly fixed it.

There are trivial things such as funeral grants. Lots of DB pension schemes pay funeral grants. As far as we can tell, that is a lump sum payment that will be in scope. Indeed, we are not absolutely sure that the scheme will not have to hold back the funeral payment because it is a payment out of the scheme in scope for inheritance tax. They have a question mark. Do they have to wait for all the IHT stuff to be sorted out and then release the money, which could be months down the track? They will be paying the funeral grant months after the funeral. It is all this kind of stuff. De minimis-type rules could help fix that, but there are little things such as that.

As was discussed earlier, it is complicated by the different sorts of DC arrangements. You could have an annuity with a guarantee period. There are those sorts of things.

It comes back to the original question. The personal representative does not have a clue. There was some discussion between the witnesses about what rules were earlier. That is another reason why the least worst solution is that the personal representative, supported ideally by somebody who knows what they are doing, helps gather the information, but then HMRC does the heavy lifting, interprets stuff with the pension schemes and the professionals deal with that.

Lord Altrincham: To Baroness Altmann’s point, you are pointing out that once again there is an incentive to withdraw.

Sir Steve Webb: Yes. It is largely at the upper end because most estates do not pay inheritance tax, for now. That may change, but for now most do not. It will, as always, be the well advised. Baroness Altmann described the process. When you get to this age, you take this per cent and then your income goes down. If you have a financial adviser sitting behind that, that is great. You are well in.

It is the people who are unadvised who, just through the natural course of auto-enrolment and savings, build up pots on top of their house and other stuff that gives them an inheritance tax bill. They will just get caught. Inheritance tax has often been described as a voluntary tax for the well advised. Inheritance tax does not hit the really well advised. It hits the next group down. That will happen again here.

Baroness Altmann: Certainly, that is a serious risk. There will also be implications for most estates from this legislation, even if they do not have to pay inheritance tax, because the PR has to check whether there is a pension that might tip over into inheritance tax.

To your question about different types of pension schemes and the implications, the least affected will be people with a DB pension that passes on to a spouse or dependant. That is considered not to be a lump sum because it pays out by the year.

The ideological thrust of these measures is that people must not be able to pass on a lump sum tax-free to avoid inheritance tax. That means a defined contribution pension is considered to be a lump sum even if it is then turned into a lifetime income. You cannot necessarily escape that way either. As the previous panel was saying, you can have the same benefits from two different types of scheme, but the inheritance tax implications would be very different.

Sir Steve Webb: Can I just pick on one point that we have not mentioned, if I may? We have talked about spouses, but co-habiting partners are in. For a widow who was not married to the deceased but lived with him for 30 years, everything is in. The whole lot is in. There is no exemption. The difference between being a married partner or an unmarried partner will be enormous. That is another different sort of pension. You may say, “They should just get married, shouldn’t they?”

Lord Altrincham: We have heard of many pressures to marry on this committee.

Q82 Baroness Bowles of Berkhamsted: Before I ask my question, can I just clarify something? It is not a complete tax dodge to have a big pension fund and to have not used it. The recipients of that will, unless they are exempt, pay tax at their marginal rate. You have tax relief on the way in and then you pay tax when you draw it down, whether you are the pensioner or the beneficiary. “Tax relief in, tax paid later” still applies. It is not really a dodge. Yes, there are different rates.

Sir Steve Webb: It is seen as an IHT dodge rather than an income tax dodge. That is the distinction.

Baroness Bowles of Berkhamsted: Yes, but inheritance tax was not there. Anyway, in and around that and on all these other things, have the Government engaged effectively with stakeholders in shaping its policy decisions around this measure? I include in that, right from the beginning, this debate about what is being evaded or not.

Baroness Altmann: Just on your first point, if I may, the age 75 cut-off is a bit of an anomaly in that regard. Indeed, I still think that there is an opportunity to get rid of that age 75 cut-off. I know that the relatives of people who died before 75 would be very angry about this, but why does it make a difference whether your pension fund is passed on when you are 74 or 75 as to whether the person you pass it to pays income tax on it or not? If you are under 75, they do not pay the income tax. There is money to be made for the Government potentially by levelling the playing field on age. That is perhaps in line with your comment about the assisted dying Bill for someone who is 74.

My suspicion is that the Government have not engaged, and it would be very hard for them to engage, with the personal representatives who we are all very concerned about. They do not know what is coming. They do not even know that their loved one is going to pass away. They may have no idea that their loved one has a pension. Therefore, it is hard for the Government to engage with them. The Government have understandably engaged with the industry, the large pension providers and the financial advisers. The concern is whether they really have understood or appreciated what is going to happen on the ground to most people, not the top level but most people, whether or not there is an IHT liability.

I would be interested to understand the cost estimates that the Government have made and the potential risks and liabilities being faced by ordinary loved ones who will get caught up in this. I have not seen any modelling of the risks.

Of course, once stories start getting out into the press, when some widow is bankrupted because she did something wrong on pension inheritance, when a daughter is unable to inherit what she thought she would or whatever it is, you are going to see the implications on the confidence in pensions even if it does not happen before. Most people would not have any idea and could not probably imagine the level of complexity and difficulty that is going to be imposed as a result of this. It is very hard to expect a journalist to start talking about it. It has not happened yet. It is not a very sexy story, is it?

Sir Steve Webb: On the question about engagement, I am going to say a sentence that is rarely uttered in these halls. I have some sympathy with HMRC. The Government decide the policy, announce it, bank the revenue in the Red Book and move on. Poor old HMRC is then left to make the best of a bad job.

To be fair to them, they have engaged a lot with the industry. The July 2025 changes, including excluding death-in-service benefits, which was good, indicate that they are willing to change things. To that extent, they have.

The key point that Baroness Altmann makes is, of course, that the future personal representatives of Britain do not know who they are. They are not a lobby group. They do not have tractors, for example. They cannot make a fuss collectively, whereas the pensions industry is well resourced and can.

The challenge with all this is about how HMRC can properly listen to the individuals who are going to have to deal with the system. It really cannot, to be honest. As a result, the system is probably far too geared towards those who are well organised.

Baroness Bowles of Berkhamsted: My question was actually about the Government as well. Before Government made the instruction, what was the engagement?

Sir Steve Webb: Zero, as far as I am aware.

Baroness Altmann: Yes.

Sir Steve Webb: It is a Budget. They just announced it in the Budget.

Baroness Altmann: It came totally out of the blue.

Sir Steve Webb: There have been think tank reports and stuff like that.

Baroness Altmann: It does strike me, as we have said, that the industry is a much better place to be able to cope with all this than a personal representative. I understand that the industry does not want to be on the front line. Of course I do, but putting personal representatives on the front line is not going to work terribly well. I am not sure who would be in a position to hand-hold and help them, certainly for free.

The Chair: This brings us to Baroness Fairhead’s question.

Q83 Baroness Fairhead: It is almost a pointless question, given that answer there. This is the fundamental question: what more could the Government do to raise awareness ahead of April 2027? The actual question that I have been allocated was, “How aware of the proposals are those who will be affected by it?” Given that we have agreed it could be minors or people who are incapacitated, and given that these people do not even know they are going to be PRs in the future, it is difficult to have an awareness plan. What more could be done to raise awareness generally? That is probably the question that I have to ask.

How can people understand the interaction with income tax? Is there anything more that the Government can do, if they are determined to go down this route, despite the legion of issues?

Sir Steve Webb: They literally cannot do more. On the idea that your average punter can get the interaction between income tax and inheritance tax and all of this, professionals get it wrong, so they do not have a hope. If somebody has to gather the information together, that is fair enough. Somebody has to do it, whoever that person is. Having gathered the information as best they can, in good faith, somebody else should do all the stuff. If someone has agreed to be an executor in a will—I know there might not be a will, of course—they probably have a vague sense that they will have to do something.

If and when this system is up and running, it will be about things such as standardising everything. If we are really expecting people to contact pension schemes, we need to give them pro formas. They should not have to think, “What do I put in the letter?” It should just be, “This is the thing that you send to the scheme”.

The point that has been bubbling up in all of this is that impact assessments tend to talk largely about the people who end up paying the tax. Something that we have both been saying is everybody who is a personal representative in respect of somebody who has any pension at all, which is most people in a world of auto-enrolment, will have to go through some of this stuff, even if the answer is zero at the end. Although it might be another 50,000 estates early on and more later, millions of people over the coming decades will have to go through all this largely to be told, “The answer is zero”. That cannot be right.

Baroness Altmann: Yes, that is a really important point that was probably not well recognised when this policy and the proposals were drawn up. I hope the committee can highlight some of the practical implications of this. Maybe the Government can work more with the industry to figure out how this could be streamlined and take some of the burden off people who are just not able to cope with it.

Even if they send a pro forma about the pension, when they get an answer back that gives them all this jargon, they will not know what that means. They will not necessarily get a figure and, “This is the expression of wish form”, not that they will know what that means either. “These are the people who might inherit”. What are they going to do with that information? We need a lot more careful thought about the practicalities of this. We have a year and a half to get this done.

The Chair: The Government claim, of course, that not many people are going to be affected by this because it is only very well-off people.

Baroness Bowles of Berkhamsted: That is in payment terms, whether or not they will have to pay anything.

Q84 The Chair: I take the point that people are going to think they are affected, but, if the Government are right that in practice only a tiny minority of people are going to be affected, why can something not be done to make that clearer?

Baroness Altmann: It is not just affected as far as money is concerned. They will be affected because they have to find pension entitlements, which the person themselves may not even have known about. They will be responsible for having found them or not having found them. They will be responsible for looking into the people who might or might not inherit the pension as well as whether or not there is money to be paid. The PR is probably still responsible for how the pension is going to be distributed. The pension provider is not.

Sir Steve Webb: No, the provider is still dealing with that.

Baroness Altmann: They will do.

Sir Steve Webb: Yes.

Baroness Altmann: What if there is a disagreement between the will and the—

Sir Steve Webb: Wills have never mattered. The scheme is going to make a decision as to who gets the discretionary benefits. They might look at the will as evidence, but the will is not binding in any way on the pension provider.

Baroness Altmann: Is that even under the current proposals?

Sir Steve Webb: Yes. For example, there might be no will. Even if there is, the pension provider might have been told who the person wants to have the money. If that is who I have told you I want you to give the money to, that is who I expect you to give the money to. If they say, “Yes, but your will says this”, it might talk about the cash, the house or whatever, but that is different.

Baroness Altmann: Again, that would suggest that we should have a system where the PR does not have to get involved with the pension scheme. The pension provider should look after the pension matters because they understand the pension matters. The PR does the rest of the estate and figures out whether there is a liability or not, which is then passed on to the provider. That is not the system that we are currently debating, as far as the legislation is concerned.

Sir Steve Webb: Just on your point about the revenue, it is important to make the distinction between now and in years to come. As you well know, we are on this huge shift from defined benefit to defined contribution. Although of people retiring today the number of people with DC pots is not especially large, it is rising exponentially. We have done some modelling suggesting that this is going to be a multi-billion pound revenue spinner in years to come. It might be 50,000 deaths a year today, but it will not be 50,000 deaths a year in five years’ time or 10 years’ time.

Baroness Altmann: It would be interesting to see the Government modelling of future entitlements and how they got to this idea that it would not affect that many people.

The Chair: That is a very interesting point about the change in pensions from defined benefit to defined contribution.

Baroness Altmann: Those are the people that I am really concerned about.

Baroness Bowles of Berkhamsted: You have already mentioned it, but there will be a disincentive to invest in defined contributions and the investments in these schemes will be in illiquid things such as infrastructure. That is going to be difficult. You have the defined contribution issue. If smaller schemes are being encouraged to invest in things that are illiquid, cashing those in is going to impact people other than the beneficiaries. It is going to impact everybody else in the scheme. What are the wider ramifications?

Sir Steve Webb: I am not sure I quite follow that. People die anyway, before these changes. At the point when people die, the money has to be taken out of the scheme. I am not sure that is fundamentally different. They plan on the basis of a cash flow.

Baroness Altmann: The old system had individual draw-down pots with a 55% death tax charge, which the freedoms were meant to replace. This is now bringing that back in a system where there are many more pooled defined contribution entitlements. It is not the same. My own pension fund is in draw-down and I can liquidate the assets. If you are in a pool, in a master trust or another type of arrangement, there is a risk. It is not the prime risk that I would be concerned about, I must admit.

Sir Steve Webb: Master trusts have dirty great flows in. They are all immature at the moment.

Baroness Altmann: The plan is that they are bigger and bigger.

Sir Steve Webb: They are sucking in great amounts of cash every month.

The Chair: You have been very good witnesses and given us an awful lot to think about. We are very grateful.

Baroness Altmann: We are grateful to you for looking into this.

The Chair: We are grateful to you. With that, I will conclude the formal session.