As of next year, pensions won’t automatically escape the clutches of the taxman when there is a death.
For years, inherited pensions did not form part of an estate for inheritance tax (IHT) purposes – but that will change from April 2027 after a decision by Chancellor Rachel Reeves at her first Budget back in 2024.
From then on, retirement savings will be included when the tax bill for those inheriting money is calculated.
It means those approaching retirement with large amounts of assets and savings have to rethink their plans if they want to avoid their families being hit with a bill.
Generally, those hit by IHT are wealthier than average. The 40 per cent tax only applies to estates worth over £325,000 and there are multiple extra allowances that mean for many people it is far bigger.
