The potential impact is prompting advisers to question a long-standing approach to retirement planning, under which pension savings have often been preserved while other assets are spent first. Claritas Tax says people with significant pension wealth should now review whether that strategy remains appropriate for their circumstances.<\/p>\n\n\n\n
The figure does not represent a single 67% tax charge. Instead, according to the Daily Express report, it reflects the potential effect of a 40% inheritance tax<\/strong> charge applied to the value of a pension, followed by income tax of 45% on the remaining amount.<\/p>\n\n\n\n Government figures cited in the report suggest that those affected could see their average additional tax bill rise by \u00a334,000. Claritas Tax estimates that almost 40,000 people will be affected by higher inheritance tax liabilities. The change has implications for people who have deliberately retained large pension pots<\/strong> as part of their estate-planning arrangements. Adam Keates<\/a>, associate partner at Claritas Tax, said there was \u201cno silver bullet for wealthy individuals with well-funded pensions<\/em>\u201d.<\/p>\n\n\n\n One possible response would be to draw down pension funds during retirement<\/strong>, although doing so can itself trigger an income tax charge. Keates said that paying tax while still alive could, in some cases, compare more favourably with the potential combined exposure after death. \u201cThat could still be attractive compared with a potential combined tax exposure of up to 67% at death<\/em>,\u201d he said.<\/p>\n\n\n\n Claritas Tax has also cautioned against treating pension withdrawals as a simple way of reducing inheritance tax. The decision, it said, must take account of an individual\u2019s retirement requirements as well as the tax consequences of withdrawing funds.<\/p>\n\n\n\n