Feb 25

Spotlight on IHT Pension Changes

Written by Leslie Tuck
Solicitor

DDI: 01423 726629
E: leslie.tuck@raworths.co.uk

 

The 2024 Autumn Budget brought pensions firmly into the spotlight.  The biggest change, the removal of the inheritance tax (IHT) exemption for pensions (mainly affecting defined contribution schemes) starting from the 6 April 2027 has raised a lot of questions for individuals, pension providers, probate practitioners and the Government.

The logistical implications of how estates and pensions will be reported to HMRC following a death and how the correct IHT will be collected from both are still being untangled. The Government has just closed a consultation looking at the process and practicalities of how pensions and IHT will be reported for deaths on or after 6 April 2027. Given the significance of this change, the Trusts, Wills and Estates team at Raworths has submitted a full response to the consultation.  As has been well publicised in the media, financial advisers, pension managers, and other advisers working within the pensions industry have also submitted thoughtful responses that request that the Government “leave pensions alone,” or offer alternative solutions which generate tax but so the logistics are less burdensome on individuals and the system.  We also understand there will be a further consultation on the draft legislation later this year.

These changes provide a timely opportunity for you to review your estate planning, your pension plans, your Will and letter of wishes.

So, what should you be considering now, in light of these upcoming changes?

• Are your beneficiary nominations up to date for all your pensions? Check who you have nominated and that these are still your wishes.
• Is your Will up to date? Circumstances change, so it’s always a good idea to review your current Will with your solicitor, or put one in place if you don’t have one.
• Does your estate plan do what you want it to? Will it with the impending changes? With us and your financial advisers, review your IHT position and consider whether your planning needs to be updated now.

If you have any queries about the pension changes, or how they could affect your estate planning, please do not hesitate to contact the Trusts, Wills and Estates team at Raworths.  The team would be happy to discuss any questions you may have and provide you with advice for you and your family’s specific circumstances.

Raworths is based in Harrogate, North Yorkshire.

Published on 11 February 2025

The information and any commentary contained in this briefing is for general information purposes only and does not constitute legal or any other type of professional advice.