Almost a third (32%) of people do not know how upcoming changes to pensions and inheritance tax (IHT) will affect them, Hargreaves Lansdown has revealed.

The investment and savings platform’s latest survey found that nearly 40% of cohabitees are still unaware of the changes, which will bring unspent pension funds into the scope of IHT from next April, compared to 30% of married people.

Hargreaves Lansdown also revealed that 3% of additional rate taxpayers are unaware of the upcoming changes, compared to 23% of higher rate taxpayers and 35% of basic rate taxpayers.

When asked what changes the new rules would lead to, 9% said they believe the value of their estate would be pushed into IHT paying territory, while 6% stated that they are already likely to be impacted by IHT, but the change has made it worse.

Head of retirement analysis at Hargreaves Lansdown, Helen Morrissey, said that while IHT may not be an issue for the majority of people, it is something that is worth preparing for if you own your own home and have a decent pension.

She concluded: “IHT can become an issue if your estate is worth more than £325,000. Added to this, if you are looking to pass down the family home to a child or grandchild, you have a residential nil rate band worth £175,000 that you can use. Married couples and civil partners have extra flexibilities in that assets of any value can be passed between them without being subject to IHT. They can also inherit unused portions of each other’s nil rate bands. This means that a widow/er can potentially pass on an estate worth up to £1m before worrying about IHT.

“However, it’s important to add that these flexibilities do not apply to cohabiting couples. You can live together for decades but, when one partner dies, there’s potential for a nasty surprise bill at an already difficult time. Worryingly, almost 40% of cohabitees remain in the dark about how these changes might impact them.

"It’s important to think about how the change might affect you and your family - if you think there could be a liability you can put a plan in place."

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