No penalty

The Telegraph pointed out a loophole under the new pension rules.

The abolition of the 55% rate ‘death tax’ means that higher rate taxpayers whose fund exceeds the lifetime allowance of £1.25m will effectively pay no penalty for breaching the limit – they will get 40% tax relief on their contributions and pay a total of 40% tax for having exceeded the limit.

New rules always have unintended consequences, and this one may be targeted by HMRC in amendments to the rules which we expect to be introduced before next April.