Rachel Reeves has been slammed for her reported plan to hit savers. The Chancellor is predicted to announce tax hikes as she scrambles to plug a huge hole in the public finances, including pension and inheritance tax (IHT) tweaks. Rumours abound that new rules could bring pensions into scope for IHT liabilities from 2027. Wealth management firm Saltus says that the prospect of the introduction of IHT on defined contribution pensions is “sharpening concern” among high net worth (HNW) households.
A third of respondents to a recent survey of 2,000 UK respondents who possess more than £250,000 in investible assets, not including primary residence, say they are already exploring strategies to protect their pension from IHT. Three in 10 are reviewing or adjusting their pension savings or retirement planning ahead of potential legislative changes. There has also been growing speculation suggesting that pension benefits – including the 25% tax-free lump sum entitlement – could be targeted.
According to Saltus, most experts view such a move as “politically risky and technically complex”, and high net worth individuals (HNWIs) view IHT as one of the most “unfair” elements of the UK’s tax system.
Fears have “fuelled further unease among savers already adapting to the new inheritance tax rules”, experts add.
In March, it was predicted that the overall tax burden in the UK was forecast to rise from the equivalent of 35.3% of GDP in 2024/25 to 37.7% in 2027/28 – the highest level since records began in 1948.
Alex Pugh, financial planner at wealth manager Saltus, said: “Tax has become one of the biggest sources of uncertainty for clients this year, not just because of what’s been announced, but because of what might come next.
“Inheritance tax in particular is politically sensitive, and the decision to bring pensions into scope from 2027 has really sharpened focus on long-term planning.
“Many clients are asking whether the rules could change again, and how to prepare without making reactive decisions.”
He added that the most common question he has had recently is about tax-free cash.
Mr Pugh said: “Clients are understandably nervous about whether that could be targeted next. This concern underlines just how much confidence has been shaken by the pace of change.
“Now more than ever, clients need to approach inheritance and legacy planning thoughtfully.
“There’s no one size fits all answer.
“Strategies like annuities, gifting or business relief investments all have a place depending on individual goals.
“What matters is keeping planning aligned to values and long-term objectives, rather than reacting to every headline.”