Chancellor Rachel Reeves announced plans to include unused pension funds and death benefits within the value of estates for pensions and inheritance tax purposes during the Autumn Budget 2024. Under the proposals, pension administrators will report and pay IHT directly to HMRC.
Death-in-service benefits paid out by employers have traditionally been separate from personal pensions for the purposes of calculating an IHT bill. By including unused pensions and death-in-service benefits in IHT calculations, more estates could face higher taxes.
This announcement came as a surprise, particularly to those who have worked hard to build a pension as a tax-efficient way to pass wealth on to loved ones. Any changes are likely to have the greatest impact on people with established estate plans.
Timeline
A 12-week technical consultation on the proposed changes concluded on 22 January 2025. Once the feedback has been reviewed, government consultation principles outline that responses should be published within 12 weeks. By the third quarter of the year, the government is expected to provide specific implementation guidance on how guidance on how pensions and inheritance tax rules will apply under the new regime. Any changes won’t take effect until 6 April 2027.
As proposals are not finalised, it’s wise to consider potential implications but await the final guidance before overhauling plans. This still gives ample time to make changes before implementation in 2027.
A review of existing pension arrangements would be useful so we can think about how the proposed pensions and inheritance tax changes could affect what your beneficiaries would receive.
Time and knowledge
Rest assured, we are monitoring developments and will keep you in touch as we know more. When we have more certainty, we may suggest you consider alternative options that ensure your estate remains as tax-efficient as possible and aligned with your goals. Together, we’ll help you secure your family’s future with confidence.
Get in touch
Changes to pensions and inheritance tax could have important implications for your estate and the people you want to provide for. If you’re unsure how the proposed rules may affect your pension or existing plans, we’re here to help.
Our advisers can review your current arrangements and talk through the potential impact, helping you stay informed while keeping your plans aligned with your long-term goals.
We’re based in Eastbourne, East Sussex, and work with clients across the South East, including Brighton, Lewes, Hastings, Uckfield and Tunbridge Wells.
You can also explore our blogs and watch our short videos for further insights on pensions, estate planning and financial planning, or check out our VoucherFor reviews to see what our clients say about working with us.
Get in touch to arrange a no-obligation chat with one of our experienced financial advisers.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate will writing, tax and trust advice and certain forms of estate planning.
It is important to take professional advice before making any decision relating to your personal finances. Information within this blog is based on our current understanding of taxation and can be subject to change in future.
It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.
The information contained within the blog is for information purposes only and does not constitute financial advice.
The purpose of the blog is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.
