Majority of UK adults to adjust estate planning ahead of IHT rule change

More than half (54%) of UK adults are planning to adjust their retirement or estate planning in response to the Government’s inheritance tax (IHT) changes on pensions.

This is according to new research by interactive investor, which also found that 21% of respondents plan to withdraw more money from their pension than originally intended to spend.

In the Budget last October, the Chancellor announced plans to include unused pension savings and certain pension death benefits in the value of estates for IHT purposes, as part of proposals due to take effect from 6 April 2027.

interactive investor’s findings, based on a survey conducted among 1,064 visitors to the group’s website earlier this month, also showed that 19% plan to withdraw more money and gift it rather than spend it, 8% intend to reduce their pension contributions, and 6% plan to retire earlier than originally expected due to the impending change.

Meanwhile, 13% remained undecided, while 34% had not considered altering their current retirement or estate planning strategy.

Senior personal finance analyst at interactive investor, Myron Jobson, said that despite uncertainty over how IHT on pensions will be implemented, many people are already “considering pre-emptive steps” to reduce their future tax burden.

“It’s interesting to see that more people are considering drawing down larger sums from their pensions in response to these changes,” Jobson commented. “At first glance, this might seem like a savvy move -accessing funds now to spend or gift before new tax rules come into effect.

“But there are important trade-offs to consider. Withdrawing more than necessary could push retirees into higher tax brackets, resulting in an unnecessarily large tax bill. There’s also the risk of depleting pension savings too quickly, leaving less for later life. While gifting money can be a tax-efficient strategy, careful planning is essential to avoid unintended financial pitfalls.”

When asked about the role of pensions in estate planning, 52% of respondents to the interactive investor survey said their pension forms a “key component” of their strategy.

A further 23% said they considered pensions as part of their plan to limit IHT but not in detail, while 25% said they had not factored pensions into their estate planning at all.

“Significant changes to the pensions system risk undermining confidence in it,” Jobson added. “Pensions are long-term investments, and frequent rule changes can leave savers uncertain about the future.

“Stability and clarity are essential to ensuring people feel secure in their retirement planning.”



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