Old Socialist comments.
Nov 24, 2024
Headline: When my life was shattered, death benefits helped me cope
Sub-headline: Proposals to tax many lump-sum death benefits cannot be right, morally or legally
Read the beginning senteses of Mr. Colevile’s essay:
A few years ago my wife made a fateful financial decision. She was worried that we didn’t have enough money coming in, especially given the exorbitant costs of childcare. Her employer, a large bank, offered a great set of benefits. But why did we need them? We were young, in good shape, watching our weight.
I remember we laughed, in particular, at the idea that she’d need life assurance any time soon, let alone at the absurdly generous rate they were offering. So — for the sake of an extra £22.81 a month — she moved that slider down as far as it would go: from eight times her salary to just two.
By early 2019, when the company asked again for her benefit choices, no one was laughing. Andrea was in hospital, seriously ill. She tried to log in to change her decisions. But she couldn’t get it to work, defeated by a combination of horrendously fiddly remote working settings (this was before the pandemic), awful hospital wi-fi and increasing lethargy.
When we think about losing a loved one, especially before their time, we think about the emotional shock. It seems almost callous to focus on the finances. But there is often an awful financial shock, too. In my case I suddenly found myself with a mortgage, two children (one less than a year old) and — if I wanted to continue working — vastly increased childcare costs, all to be covered by one salary rather than two.
Worse, even if your loved ones have savings or assets, you cannot actually make use of them, often for many months. Everyone I spoke to was very understanding. But they all needed certified copies of the death certificate, or the will, or ultimately the grant of probate. Even when her pension was paid out, or her bank account was folded into mine, I wasn’t sure I could touch any of it until the inheritance tax calculations had been finished and the probate process was done.
But there was an exception. Andrea’s “death in service” benefits weren’t as large as they might have been had she pushed the slider back up. But they were still a tax-free lump sum I knew I could rely on to keep the lights on — along with a discretionary payment her employer kindly made, equivalent to her notice period. Together they gave me breathing space: a guarantee that I could keep paying the bills while I worked out what the hell to do next
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Should this be titled Thatcerite meets ‘The Reality Principal?’ Or should the Reader look to the fact that there are the Hungry, the Homeless, The Pensioners without heat, Hungry families, Rough Sleepers across Britain, that are suffering from the Neo-Thatchrite politics of Kier Starmer and Rachel Reeves?
It’s not that Mr. Colvile’s plight of loss is not moving, and its aftermath in personal and economic terms, was not devistating! His moral/political failure, to connect his suffering to the suffering of others, in an embrace of a common fate: this is about Class and felt Etitlement, of a well paid Thatcherite, to enveigh against his almost fellow travelers!
Editor: The final pargraphs of Colvile’s essay:
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This is, in other words, a tax on tragedy. As journalists have pointed out, it will even apply to the police, though it is unclear whether it will affect the special awards for those who die in the line of duty.
I do not believe that the civil servants who made these decisions were being deliberately callous. The technical consultation feels far more like an exercise in bureaucratic tidying-up, in making sure that if the chancellor wants to extend inheritance tax to pensions, there will be no gaps left in the net.
But, at the risk of repeating myself, death-in-service benefits are different. They are not a fiddle. They are not a con. They are not something you can game. They are a payment made when, and only when, something has gone horribly wrong in someone’s life. They are, for many of us, a vital lifeline in the midst of death. And it cannot be right, morally or legally, for the taxman to take a chunk — let alone for that to happen only to people with a particular kind of pension setup or a particular marital status, or who want to make the payment to one dependant rather than another.
I’m not a pensions expert. I certainly don’t have the grasp of detail to make a formal submission to the Treasury consultation. And there are probably all sorts of fiddly details I’ve got wrong.
All I know is that I can’t think of a worse tax, at a worse time. Ministers should, and must, think again.
Old Socialist
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