Millions of savers are being urged to protect themselves following sweeping HMRC tax changes that could increase the average bill for affected households by around £34,000. The reforms will also pull thousands more estates into paying inheritance tax for the first time.
Research by Standard Life reveals that more than half of adults (54%) fear their loved ones will face a heftier tax bill upon their death, while 22% say the changes have left them feeling less confident about their pensions. The impending reforms are already influencing behaviour, with savers withdrawing £3.9bn from pensions in lump sums during the year after the announcement – up £868m on the previous period.
From April 2027, unused defined contribution pensions will be counted as part of your estate for inheritance tax purposes, a major shift from the current system. However, defined benefit pensions, typically paid to a surviving spouse or civil partner, will remain unaffected. The proportion of estates paying inheritance tax is projected to double from 5% to roughly 10% by the end of the decade.
Mike Ambery, retirement savings director at Standard Life, said: “It’s understandable that many people are reassessing how their retirement savings are used and passed on. However, scammers thrive on fear and uncertainty – when people feel unsettled or rushed, they’re more likely to fall victim to a scam.”
Experts caution that the spike in withdrawals and uncertainty are creating ideal conditions for scams. Savers are urged to remain vigilant and seek guidance from Pension Wise or a regulated financial adviser. As Mr Ambery added: “For many people, their pension savings simply won’t be large enough to fall into inheritance tax at all – but fraudsters may still try to convince them they need to act urgently.”
