For decades, many people have relied on their pension as a secure, tax-efficient way to save for retirement and pass on a legacy. But a significant change is on the horizon that could dramatically impact your estate.
As of April 2027, unless reversed, your remaining pension funds will no longer be excluded from Inheritance Tax (IHT). This means that for many, a lifetime of diligent saving could be subject to a 40% tax if you have used up your nil-rate band allowance on other assets.
Imagine this scenario:
You have a pension pot of £1 million. If your other assets—like your property—have already used up your nil rate band allowance (£325,000 or £500,000 if leaving property to family), this entire pension will be subject to IHT. The government could take a staggering £400,000 (40%), leaving your loved ones with far less than you intended.
This is a wake-up call. The strategies that worked in the past for protecting your wealth are about to change, and so must your approach. It’s no longer enough to just save; you now need to actively plan and manage your pension to mitigate this potential tax liability.
Many clients are looking to get in front of these proposed changes and planning ahead, especially if looking at estate planning and wishing to leave a legacy for family members.
Make time now to speak with your IFA about how this affects your own situation. If you don’t have one, let's book in a call to discuss.
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