Today, Chancellor Rachel Reeves presented Labour’s first budget in 14 years, announcing changes to inheritance tax (IHT) rules that will include pensions under its scope starting in April 2027. Reeves stated that this decision is aimed at closing a “loophole created by the previous government.”
Industry experts have noted that this shift will significantly impact estate planning, particularly for those with larger estates and pension funds. Mike Ambery, retirement savings director at Standard Life (a part of Phoenix Group), explained that pension pot values will now be combined with other assets when calculating the IHT threshold of £325,000, with taxation applying to amounts above this threshold—subject to existing exemptions.
Ambery highlighted that this marks a substantial change for individuals with larger assets, especially in terms of accessing retirement funds. Currently, people often draw from ISAs and other savings before pensions, which are typically preserved. However, as pensions will be liable to IHT, there may be an increase in early pension access to reduce potential tax liabilities on estates in the future.
