Thousands of pension savers are reviewing their retirement plans ahead of changes that will bring some unused pension funds into the scope of inheritance tax from 2027. The reforms are prompting some people to consider withdrawing money or seeking financial advice before the new rules take effect.
Pension Pots Set to Face New Inheritance Tax Rules
The changes, announced under former Chancellor Rachel Reeves, are expected to come into force in April 2027. Under the new system, unused defined contribution pension pots will be considered when calculating inheritance tax for the first time.
Currently, many people choose to leave their pension savings untouched during retirement because these funds can be passed on to beneficiaries under different tax rules compared with other assets. The upcoming reform has led some savers to reconsider how they manage their pension funds and wider estate planning.
Survey Shows Growing Concern Among Savers
Research from Hargreaves Lansdown found that some pension savers are already considering changes to their plans. The survey of 300 people found that one in four respondents intended to withdraw tax-free pension cash and gift it to family members before the new rules begin.
More than a quarter of those surveyed said they planned to seek professional financial advice before deciding what action to take. The findings suggest that many savers are reviewing decisions they had previously made about preserving pension funds for future generations.
Families Consider Gifts Before Rule Changes Begin
One option being considered by some households is giving money away during their lifetime. Potential examples include helping relatives with a house deposit, contributing towards a wedding, or making regular payments into savings accounts designed for younger family members.
Financial experts say such gifts can form part of estate planning, but they warn against making decisions based only on tax concerns. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said some people had originally planned to use other assets first and leave pension savings for family members.
She warned that withdrawing large amounts without careful planning could leave retirees with insufficient funds later in life.
Experts Urge Careful Retirement Planning
The inheritance tax changes represent a major shift in how some pension savings may be treated after death. Financial advisers say retirees should review their income needs, savings, investments and future expenses before making decisions.
Although gifting money may reduce the value of an estate, it also means giving up access to those funds permanently. The changes highlight the importance of balancing plans for passing on wealth with the need to maintain financial security throughout retirement.
As the 2027 implementation date approaches, pension savers are expected to continue reviewing their options and seeking advice on how the new rules could affect their families.
