PFS What's new bulletin - July

EWHC rule that disputed will is not genuine 

(AF1, JO2, RO3)

 

A recent case in which the England and Wales High Court (EWHC) ruled that a will, which essentially disinherited a man’s only child, is not genuine, after suspicion around the drafting and storing circumstances.

 

Mosammat Shapna Khatun (the claimant), the only child of Monir Jaman Shaikh (the deceased) claimed to have a good relationship with her father. However, when he passed away, an alleged will was produced that directly disinherited her. 

 

The will in dispute left the deceased’s estate, made up of four properties and a solicitors practice, to Shamim Hasan (the first defendant), who claimed to have had a relationship with the deceased ‘akin to that of son, or nephew, or next of kin’. Both the claimant, and brother of the deceased were barely aware of Mr Hasan’s existence, with Ms. Khatun saying she was ‘unaware, or only dimly aware, of the existence of Mr Hasan’. 

 

The disputed will was produced by a struck off solicitor, Rajesh Kumar Singh Pathania (the second defendant). Despite the rest of his legal work being undertaken at a different law firm, the deceased had allegedly drafted the will and entrusted it to the second defendant.

Whilst examining the will, the EWHC found that there were several anomalies and errors, in addition to numerous spelling mistakes which included the name of the claimant. The will also referenced properties in Pakistan which didn’t appear to exist or be owned by the deceased. In addition, the will only dealt with the residue of the estate, without making any primary bequests.

 

Furthermore, there was no documented evidence of the will being executed, with a handwriting expert testifying that there was strong evidence suggesting that it had been written and executed by someone familiar with the deceased’s signature. 

 

The judge commented that ‘The Disputed Will as a whole does not present as the work of an accomplished lawyer. In addition to the minor spelling mistakes, it is an oddity to bequeath the residue of an estate when there has been no primary bequest in relation to which the remainder can be residuary. Paragraph 8, which directs the executor to distribute the residue of the estate, had a subclause a., but no further subclauses. It is not immediately apparent why the drafter felt the need to include clauses 9, 10, 11 and the following unnumbered paragraph, when clause 8 had already operated to bequeath the entire (residue of the) estate to Mr Hasan. Moreover, those provisions appear under the heading "Wipeout Provisions", which is inapposite: the use of the term "Wipeout" in the context of wills is to provide an alternative legatee should the primary named legatee(s) not survive the testator. This is not what the drafting of the Disputed Will goes on to provide.’

The EWHC found that the circumstances surrounding the alleged execution of the disputed will raised suspicion, and that significant doubt was raised over whether it was genuine. The responsibility fell on the defendants to prove that the will was in fact authentic. However, in the court’s opinion, they failed to do so. (Khatun v Hasan & Anor (Re Estate of Mr Monir Jaman Shaikh (Deceased)(Probate)), 2025 EWHC 1658).

 

 

Support for Mortgage Interest loans - updated DWP guidance

(ER1, LP2, RO7)

 

The Support for Mortgage Interest (SMI) policy was introduced to prevent low-income homeowners from losing their homes, through contributions towards their mortgage interest payments. The policy transitioned from a benefit to a loan in 2018, resulting in a reduction in the number of recipients.

 

In April 2023, changes were made to the policy to widen eligibility criteria and encourage employment among Universal Credit recipients. SMI was extended to in-work Universal Credit claimants, removing the previous ‘zero earnings’ rule. Previously, no SMI could be paid when a claimant or their partner was doing any paid work. Also, the qualifying period was reduced from nine months to three.   

 

The DWP has recently updated its SMI Lender’s handbook. The updates are intended to provide more detail to aid lenders and provide helpful information about the SMI scheme and associated processes for making applications.

 

Working-age claimants must receive Universal Credit for a three-month qualifying period before they qualify for SMI. This was reduced from nine months in April 2023. Pension Credit claimants can get SMI immediately. 

 

SMI can help with the cost of interest on mortgages and certain other home loans up to specified loan caps: 

 

·         £200,000 for most working-age claimants;

·         £100,000 for Pension Credit claimants.

 

The amount of SMI payable is not based on the actual amount of interest households pay on their mortgages or loans. Instead, it is calculated using a standard interest rate. The interest rate used to calculate the amount of SMI recipients will get is currently 3.66%.

 

Example 

 

Alex has a £250,000 mortgage left to pay and are eligible for SMI for up to £200,000. 

At the current SMI interest rate, they will receive a loan of 3.66% of £200,000 across a year. This is £7,320 a year or £610 a month. 

 

SMI loans are repayable with interest when the property is sold, ownership is transferred, when the claimant dies, or on a voluntary basis. According to the DWP, the interest charged on the amount of SMI loan payments is set for six-month periods at the average gilt rate published by the Office for Budget Responsibility (OBR), and the rate as of January 2025 rate is 4.1%.

Once SMI is in payment, lenders are required to apply the amount paid to the interest on the claimant’s mortgage and any qualifying loans. Any SMI exceeding the claimant’s liability must be applied in the following order: 

 

·         to any arrears of mortgage payment;

·         capital repayments;

·         to any other loan with the same lender.

 

Upon request, lenders must inform the DWP of the amount outstanding on the claimant’s mortgage, and any recent changes in that amount. Further, they must notify the DWP as soon as possible when the claimant’s mortgage is redeemed or is expected to be shortly.

 

The Social Security (Mortgage Interest Payments) Act 1992 permits direct payments of mortgage interest to be made from income-related benefits. 

 

The Social Security Claims and Payment Regulations 1987 deals with the mortgage interest direct scheme – Regulations 34A and 34B and Schedule 9A. 

 

The Loans for Mortgage Interest Regulations 2017 governs the SMI loan scheme and details the responsibilities of lenders to provide DWP with the information required to administer SMI loans.

 

 

New HMRC bereavement helpline

(AF1, JO2, RO3)

 

In June, HMRC launched a new, dedicated bereavement service helpline - in addition to the existing helpline for formal estates. 

 

The new bereavement helpline (0300 322 9620) can be used by agents and personal representatives who are looking for assistance with "informal" or non-complex estates. The HMRC staff on this line should be able to assist with the affairs of the deceased up to the date of death and any estate where the period of administration is being dealt with informally, without the need for a tax return.

Please note that from 1 July 2025, the HMRC postal address for help with tax affairs to date of death and the informal administration period has changed to: Bereavement Services, HM Revenue & Customs, BX9 2BS. This new address should better help HMRC to identify sensitive post. 

 

For formal estates, where the personal representatives need to file a tax return for the period of administration, the existing deceased estate helpline (0300 123 1071) can help if anyone needs to register for and send a tax return for the administration period. 

 

The address for the formal administration of complex estates remains Bereavement Services, HM Revenue & Customs, BX9 1EL.

 

Further details can be found on the HMRC contact page for bereavement and deceased estate enquiries.

HMRC says to allow 12 weeks before chasing post relating to bereavement issues as chasing can slow down processing further. Once the 12-week period has passed, agents should call the appropriate bereavement helplines above rather than the main dedicated agent helpline, as says HMRC, its bereavement teams are specially trained in this area and will be better able to help.

 

The Association of Taxation Technicians (ATT)’s guide to Managing income tax for a deceased estate has been updated to reflect the changes above. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT PLANNING

 

June inflation numbers

(AF4, FA7, LP2, RO2)

 

The UK CPI inflation rate for June 2025, which was 3.6%, up 0.2% on May

 

Source: ONS

 

On Tuesday, US inflation figures were released showing a 0.3% jump in the annual CPI to 2.7%. The June number had been eagerly awaited by many commentators as the first in which the impact of Trump’s tariffs would start to show. 

 

In the UK, on Wednesday, the Office for National Statistics (ONS) said that CPI inflation for June rose by 0.2% over the previous month, to 3.6%. That was 0.2% above market expectations and takes inflation to its highest level since January 2024. In its last Monetary Policy Summary the Bank of England said it expected CPI to peak at 3.7% in September. That may now be an underestimate.

 

The UK CPI reading was up 0.3% between May and June, which compares with a 0.1% rise in the corresponding period of 2024. The CPI/RPI gap narrowed by 0.1% to 0.8% with the RPI annual rate rising by 0.1% (to 4.4%). Over the month, the RPI rose 0.4%. 

 

The ONS’s favoured CPIH index also rose by 0.1%, to an annual 4.1%, reducing its historically high margin above the CPI. As we have regularly said in recent months, a large part of that excess is due to the owner occupiers’ housing (OOH) category, which has a 17.1% weighting in the CPIH but is absent from the CPI. The OOH inflation rate dropped 0.3% to 6.4%, 1.6% off its peak January 2025 level and the lowest since March 2024. 

The ONS attributed the increased CPIH inflation to:

 

Main upward drivers

 

Transport. 

Overall prices in the transport division rose overall by 1.7% in the 12 months to June 2025, up from 0.7% in the 12 months to May. On a monthly basis, prices rose by 0.7% in June 2025, compared with a fall of 0.2% a year ago.

 

The rise in the annual rate reflected a large upward effect from motor fuels. The average price of petrol fell by 0.5p per litre between May and June 2025, compared with a larger fall of 3.0p between May and June 2024. Similarly, diesel prices fell by 0.6p per litre in June 2025, compared with a fall of 4.8p in June 2024. These movements resulted in overall motor fuel prices falling by 9.0% in the 12 months to June 2025, compared with a larger fall of 10.9% in the 12 months to May.

 

There were also upward effects from air fares, rail fares, and maintenance and repair of personal transport equipment. 

 

Clothing and footwear. 

Overall prices rose by 0.5% in the 12 months to June 2025, compared with a fall of 0.3% in the 12 months to May. The 12-month rate has fluctuated between positive and negative during 2025 and has turned positive again following two consecutive negative readings.

On a monthly basis, prices fell by 0.4% between May and June 2025, compared with a larger fall of 1.2% a year ago. These price movements reflected changes in the proportion of discounted prices which rose between May and June 2025, but by less than between May and June 2024. 

The rise in the 12-month rate was the result of small upward effects across a wide range of clothing and footwear. 

 

Food and non-alcoholic beverages. 

The 12-month inflation rate for food and non-alcoholic beverages was 4.5% in June 2025, the third consecutive increase in the rate. It is now the highest recorded since February 2024 but is well below the peak of early 2023. On a monthly basis, sector prices rose by 0.3%, compared with a rise of 0.2% a year ago. 

 

Main downward driver 

 

Housing and household services.

 The 12-month inflation rate for housing and household services was 6.7% in June 2025, down from 6.9% in May. On a monthly basis, prices rose by 0.2% in June 2025, compared with a rise of 0.4% a year ago. 

 

The easing in the 12-month rate between May and June 2025 principally reflected a downward effect from owner occupiers' housing (OOH) costs.

 

Seven of the twelve broad CPI divisions saw annual inflation increase, while four fell and one remained unchanged. The categories with the highest annual inflation rate are led by Housing, water, electricity, gas and other fuels (7.5%) and Education (also 7.5%) and Alcoholic beverages and tobacco (6.4%). 

 

Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) rose 0.2% to 3.7%. Goods inflation rose 0.4% to 2.4%, while services inflation was flat at 4.7%, 0.1% above market expectations. 

 

The ONS has identified problems in the calculation of its Producer Price Inflation indices and, in May, issued a statement that publication of the data would be “paused” for the time being. This remains the case.

 

Comment

The Bank of England’s next interest rate decision is on 7 August. There has been a growing expectation that the Bank would continue with what looks like a quarterly rate cutting cycle. The combination of today’s inflation numbers (+0.2%), yesterday’s earnings data (5.3% annual growth including bonuses, -0.3% down on the previous reading) and the disappointing May GDP reading (-0.1% after -0.3% in April) leave the Bank in an awkward position. At the June meeting, there was a 6-3 vote for holding rates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PENSIONS

 

State Pension Age review

(AF8, FA2, JO5, RO4)

 

In March 2023 the Independent Review of the State Pension Age (SPA) by Baroness Neville-Rolfe alongside was issued another independent report by the Government Actuary. Both had been commissioned to examine the proposals in the 2017 Cridland report, which was the first examination of SPA. Back then the government deferred a decision to go ahead on Cridland suggestion of an SPA of 68 from 2037-39 for what was seen by some as political reasons. That was almost certainly the logic for a further deferral that was announced by Mel Stride when the 2023 reports emerged. Stride committed the government to “have a further review within two years of the next Parliament to reconsider the rise to age 68.” His timing not only kicked the issue down the road until after the next election, but also left just enough time for Cridland’s 2037 starting date for a 68 SPA to be chosen while also giving ten years’ notice of an SPA change.

 

On the day that the government revived the Pensions Commission, the DWP also announced the commissioning of new work on the SPA. Although separate from the Pensions Commission work, the two strands are inevitably linked as the Commission will need to consider the state pension in its calculations of retirement benefits. 

 

 The SPA work will have two elements:

 

1. An independent report by Dr Suzy Morrissey, who is the Deputy Director of the Pensions Policy Institute and former advisor for the New Zealand Retirement Commission. The report’s terms of reference require it to consider:

• “the merits of linking State Pension age to life expectancy, including on fairness between generations
• the role of State Pension age in managing the long-term sustainability of the State Pension.
• the international experience of automatic adjustment mechanisms for making decisions about State Pension age.”

 

There is no explicit reference to consideration of when the move to an SPA of 68 should be made.

 

2. A Government Actuary’s Report which must “assess whether the rules about pensionable age mean that on average, a person who reaches pensionable age within a specified period can be expected to spend a specified proportion of his or her adult life in retirement, and if not, ways in which the rules might be changed with a view to achieving that result.” The terms of reference say that report should include

• “commentary on trends in life expectancy data
• assessment of current legislative timings for the rise to 68
• sensitivity analysis” 

 

The terms of reference also require that the ONS 2022 life expectancy statistics, published in February 2025, “must be used for the purposes of this report.” As we remarked in a Bulletin when the 2022 data was released, deteriorating life expectancy would point to the move to 68 being pushed out to 2070. The Treasury would probably not be happy with such a proposal

 

COMMENT

There is no delivery date specified for either report. However, as this government has four years left to run (in theory), it could find itself in the familiar position of deciding whether to announce an increased SPA as it contemplates the run in to next general election. 

 

 

Government presses ahead with IHT on pensions

(AF8, FA2, JO5, RO4, AF7)

 

While the Work and Pension Secretary, Liz Kendall distracted the press by announcing a review of the state pension age (see item above), the government quietly released the consultation response on the changes to pensions and inheritance tax (IHT) on 21 July.  

 

The consultation outcome confirms that the fundamental change to pensions death benefits will go ahead from 6 April 2027 when most pensions will form part of the estate for IHT purposes.

 

The consultation outcome did, however, announce a fundamental change to the process and provided welcome clarification on the scope of the changes

 

The scope

 

In terms of scope the response confirmed

 

• All death in service benefits paid from pensions schemes will not form part of the estate.  This includes some benefits that do currently form part of the estate, such as those from the NHS pension scheme.
• Continuing dependant/beneficiary payments under a pension annuity are out of scope. However, any unused guaranteed payment period annuity will be included in the IHT calculations.
• Where a pension (SIPP or SSAS) holds assets that would otherwise qualify for business property or agricultural property relief, these exemptions do not apply.

 

The process

 

The focus of the technical consultation was on how the new rules would be implemented with pension scheme administrators being responsible for reporting and paying the IHT due.

 

Due to an overwhelmingly negative response from pension providers highlighting the many complications this would create, the government confirmed that the responsibility will now fall on the personal representatives (PRs).

 

From 6 April 2027, PRs will be liable for reporting and payment of Inheritance Tax due on unused pension funds and death benefits.

 

Pension beneficiaries will become jointly and severally liable for any IHT due on unused pension funds and death benefits to which they are entitled from the point at which they become entitled.

 

Pension schemes will be required to make the liability position clear and explain to non-exempt beneficiaries (ie beneficiaries not covered by the spousal/civil partnership exemption) that IHT may be due on the pension when informing them about their benefits, how they can access them and options for paying IHT.

 

The consultation response states “where both income Tax and inheritance tax are paid on the same pension benefits, HMRC will develop mechanisms to account for any overpayments and ensure that these are refunded to beneficiaries.  We will need to wait for further information to see how this will work in practice.

 

The revised process will require personal representatives, pension scheme administrators to work together in a timely manner. The government will produce further legislation and guidance relating to this

 

Clearly there are still some complications and uncertainty with the revised process.   HMRC will begin further consultation with the pension industry almost immediately with the first workshops already planned.