Changes to the UK’s inheritance tax regime are likely to prompt a widespread re-evaluation of financial strategies by high net worth individuals, according to a pensions expert.
Simon Laight of Pinsent Masons was commenting after UK chancellor Rachel Reeves announced in her Budget speech on Wednesday that the government will bring unused pension funds and death benefits payable from a pension into a person’s estate for inheritance tax purposes from 6 April 2027.
The government said the move “will restore the principle that pensions should not be a vehicle for the accumulation of capital sums for the purposes of inheritance, as was the case prior to the 2015 pensions reforms”.
Laight said pensions could now be viewed as a less attractive vehicle for high net worth individuals for holding assets.
“This move targets those who have been leveraging Self-Invested Personal Pensions (SIPPs) as a strategic tool for inheritance tax planning,” Laight said. “With this change, the landscape of wealth management is set to evolve.
"While existing pension savings within the tax wrapper remain untouchable without incurring income tax at the marginal rate, we can expect the affluent to re-evaluate their financial strategies. The attractiveness of pensions for the high net worth segment is undoubtedly diminished, prompting a likely shift towards other tax-efficient vehicles and planning tools,” he said.
Laight added that the measure is likely to have “minimal impact on the average working individual”.
“Most new pension contributions come from this demographic, who often struggle to accumulate sufficient retirement savings, let alone leave a substantial inheritance,” he said.
