Pensioners are being warned to watch out for a deadline in 2027 over inheritance tax.
The Chancellor’s Autumn Budget held some surprises, as many were bracing for workplace pensions to be hit by National Insurance liabilities – a move that was completely absent.
However, some other inheritance tax changes may force some to completely rethink their pension pots as experts explain who will need to take action and when.
Felicia Hjertman, CEO of TILLIT, highlighted the lack of National Insurance pension contribution changes as a “welcome relief” and “reassuring step forward” – but warned that doesn’t mean savers can take their foot of the gas.
She said over 80% of households are on track to fall short of a comfortable retirement – adding: “the Government continues to face a significant challenge: creating stronger incentives for both employees and employers to prioritise private pension savings.”
David Piltz, CEO of Gallagher Benefits Services, noted the additional National Insurance burden on employers – which will see firms pay more and at lower thresholds – could make workplace pensions more attractive as a way to avoid the change.
But while workers might get a bigger pension pot from this, it could also be taken away from them through the Inheritance Tax change.
After April 2027, unused pension pots will be liable for Inheritance Tax which used to be the norm prior to 2015.
HMRC officials are still finalising the details but David has some fears about what this could mean. He said: “We hope that the final position does not result in a wider impact on this valuable aspect of pension saving with a knock-on erosion of confidence in retirement planning.”
Daniel McAfee, a legal expert and Head of Legal Operations at Lawhive, noted this move can create a more fair Inheritance Tax system.
He explained that the current exemption on pension funds could “be seen as disproportionately benefiting wealthier individuals”.
However, it will mean most Brits will have to redo their estate planning a bit more carefully now. HMRC is also facing some challenges in how they would implement this and create a bigger burden for everyone involved and “complicate the tax system further”.
