From April 2027, unused money-purchase pension assets will be included in estates for the calculation of inheritance tax (IHT) and this is already having consequences.

Many pension savers are deciding to take their tax-free lump sum or draw down more heavily on their pension pots in order to spend or gift, or in some cases buy annuities, so that they are not leaving a surplus pot that will be taxed at 40% at death. And potentially face double-tax if someone dies at age 75 or over, as a beneficiary may also pay income tax on the inherited pension fund at their marginal rate.