Rachel Reeves’ Pension Inheritance Tax Plans Spark £2.3 Billion Rush from Savers
Changes in inheritance tax rules, set to take effect in 2027, have triggered a massive surge in pension withdrawals, with UK savers pulling out £2.3 billion from their pension funds in the last year. This comes in response to concerns about the impending tax changes, which will see pensions subject to inheritance tax for the first time.
Over 116,000 individuals, aged 55 and above, rushed to access their pension benefits, with a marked increase in early withdrawals. This is a 38% rise compared to 2020, when 84,200 savers made similar moves, withdrawing £2.26 billion.
Currently, individuals can access 25% of their pension pot tax-free from age 55, but this threshold is set to rise to 57 in 2028. The government is also considering reducing the tax-free lump sum from £268,275 to £100,000, a move that has sparked significant concern among financial advisors and savers alike.
As the new inheritance tax rules loom, financial experts warn that many savers are acting hastily without fully understanding the long-term consequences. Pension assets, which are typically passed on without incurring inheritance tax, will soon face a 40% levy if left to anyone other than a spouse or civil partner.
The government has expressed commitment to supporting pension savings, but the changes have left many savers scrambling to access their funds before the new rules come into force. With the financial landscape in flux, the UK’s pension system is poised for further scrutiny as savers adjust to the evolving tax policies.
