One in five defined contribution (DC) members will save more in their pension pots because of the abolishment of the 55 per cent death tax, says AXA Life Invest.

Over half of these savers, 55 per cent, will increase their savings by 5 per cent and a quarter will increase them by 10 per cent. Five per cent of savers will add 20 per cent more.

Just over a third (36 per cent) of the 500 DC savers aged 50-70 polled by AXA said they would increase contributions from their monthly salary, 16 per cent would dip into their savings account and 14 per cent would turn to their bank account.

Announced by George Osbourne at the Conservative Party Conference in September, the changes will see the 55 per cent death tax levied on inherited pension funds reduced to a marginal rate.

Announcing the changes, Osborne said: “There are people with pension pots of twenty, thirty or forty thousand pounds who currently pay a 55 per cent tax if they try and pass on any unused part of that pension to their children and grandchildren. This is people’s own money and they should be able to decide what they want to do with it before they die.”

Echoing this sentiment, 81 per cent of DC savers surveyed by AXA said their pension is for ‘me and my family’ and almost 43 per cent disagreed with the statement ‘my pension is for me alone’.

AXA Life Invest UK managing director Simon Smallcombe commented: “The industry must acknowledge that people see their pension as an asset for their entire family. We must abandon our traditional thinking that a pension is just for the individual and stop penalising customers for wanting to share their pension security with their partner in life.”

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