Is Reeves trying to endear herself to Andy??
The high-risk scramble to avoid Reeves’s pension death tax” is the title of a recent Telegraph article discussing how some wealthier pension savers are considering aggressive strategies to reduce the impact of the UK’s new inheritance tax rules on pensions, which were announced by Rachel Reeves.
The article refers to the forthcoming changes that take effect for deaths on or after 6 April 2027:
Most unused defined contribution pension funds will become part of a person’s estate for Inheritance Tax (IHT) purposes.
Previously, many pensions could be passed to beneficiaries outside the estate and therefore outside IHT.
The change is intended to stop pensions being used primarily as a vehicle for passing on wealth rather than funding retirement.
Why is it called a “death tax”?
“Death tax” is a political or media nickname for inheritance tax. It is not an official term used by HMRC or the government.
What is the “high-risk scramble”?
According to the reporting, some people are considering strategies such as:
Withdrawing large amounts from their pension earlier than planned.
Investing the money into assets that might qualify for inheritance tax relief (such as certain business investments), although these investments can be significantly riskier.
Giving assets away during their lifetime and surviving the required seven-year period for many gifts to fall outside their estate.
Spending more of their pension during retirement instead of leaving it untouched for heirs.
The article warns that some of the more exotic investments being promoted specifically for tax purposes carry substantial investment risk and may not be suitable simply to reduce inheritance tax.
Should people rush to act?
Most financial planners advise against making major changes solely because of the tax change. The best approach depends on:
the size of your estate,
the value of your pension,
whether you are married or in a civil partnership (transfers to a surviving spouse or civil partner remain exempt from IHT),
your expected retirement spending needs, and
your overall estate-planning objectives.
If you have a large pension and your estate may exceed the inheritance tax thresholds, it is worth obtaining regulated financial and legal advice before changing your pension or investment strategy.
If you tell us:
your age, the approximate value of your pension(s), whether you’re married, and the approximate value of your other assets, KMI can assist, use the contact on our site.