The government’s decision to make pensions liable for inheritance tax could spark an increase in demand for annuities as savers rethink their retirement strategy.
At the moment pensions can be passed on free of inheritance tax (IHT) but from April 2027 most pension pots will be included in the value of an estate when someone dies.
Everyone can pass on £325,000 IHT-free when they die (£500,000 if leaving a family home to a direct descendant on an estate worth less than £2 million). This means a couple can pass on up to £1 million between them.
The government has forecast that the new rules, announced in last month’s budget, mean that about 38,500 estates already liable for the tax will face an extra £34,000 of