A wealth expert has urged people to review their pensions ahead of a significant HMRC change taking effect from April 6, 2027. From that date, most unused pension funds and pension death benefits will be included in the value of a deceased person's estate for Inheritance Tax purposes, removing distortions that have encouraged using pensions as tax planning vehicles.
Chris Ball, CEO of tax and pension advisers Hoxton Wealth, explained that leaving a pension untouched to pass on to loved ones is no longer advisable. He warned that large pensions could face up to 40% inheritance tax, with only 60% going to family.
Ball suggested drawing money from a pension and gifting it to loved ones, provided the giver survives seven years after the gift. While income tax would be payable on the withdrawal, this could save families significant inheritance tax. For example, drawing £500,000 and gifting it could save £200,000 in inheritance tax if the seven-year rule is met.
He emphasised careful planning to avoid gifting more than one can afford, ensuring financial security in retirement. Ball advised consulting an FCA-regulated adviser to implement such strategies before the April 2027 deadline.
