(Image: Supplied)
A Newton Aycliffe pension scheme say it has paused an £8.4 million manufacturing project that could support more than 500 jobs over planned inheritance tax changes.
The Stiller Small Self-Administered Scheme had planned to invest in a 200,000 sq ft North East factory but paused the project over uncertainty about bringing unused pension funds, including SSAS assets, into inheritance tax from April 2027.
From April 2027, unused pension funds, including SSAS assets, would be subject to inheritance tax.
Paul Stiller, a trustee of the scheme, said: "The new Chancellor needs to understand why this ill-advised tax change could have much wider consequences for investment, growth and jobs."
Standard employment-density estimates suggest the facility could have supported about 516 manufacturing jobs.
Mr Stiller said: "SSAS pensions have existed for more than 50 years and have become an important source of patient capital for Britain’s owner-managed businesses.
"They invest in factories, commercial property and growing companies.
"The prospect of losing 40 per cent of the remaining value of these assets to inheritance tax is inevitably changing investment behaviour now.
"Trustees who might previously have invested for the long term are asking whether they should instead preserve liquidity."
Mr Stiller said: "There is a better way.
"I believe the Treasury should look at a tax on the annual investment surpluses generated by SSAS funds rather than imposing an inheritance tax regime which discourages investment."
He has briefed the Treasury and wants to meet the Chancellor to discuss the changes and an alternative.
Mr Stiller warned the case could be an early sign of a wider impact as SSAS trustees reconsider long-term investments in property and growing businesses.
He estimates that the UK’s roughly 50,000 SSAS schemes, holding about £50 billion, could generate £3 billion a year in investment income and capital growth at an average six per cent return.
Taxing that return at the current 25 per cent corporation tax rate could raise up to £750 million a year for the Treasury.
Mr Stiller said: "Such an approach could provide the Treasury with a more immediate and predictable stream of revenue while removing the disincentive for schemes to continue investing.
"Successive governments encouraged entrepreneurs to build pension savings on the understanding that these assets would sit outside inheritance tax.
Read more
Kemi Badenoch rejects Reform deal as Conservatives return to traditional ground
Huge UK inheritance tax break could allow parents to pass on extra £1m
Millions aged 40 and over could be automatically signed up to new social care scheme
"Many people have made decisions over decades on that basis.
"The Chancellor has an opportunity to protect Treasury revenues without damaging a source of investment which is particularly important to small and medium-sized businesses.
"My message is simple: meet the people who operate these schemes, look at what is happening to investment decisions on the ground and consider an alternative before the Budget."