Budget 2024: Huge pension change that will directly impact your family confirmed

by UAE Breaking
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Rachel Reeves has today delivered her Autumn Budget – the first Labour Budget in 14 years – where she announced sweeping changes that will impact your pension and retirement pot

Budget 2024
Pension savers will want to be aware of major changes announced in the Budget today (Image: Getty Images/iStockphoto)

As part of her Autumn Budget, Rachel Reeves has confirmed that pensions will soon be subject to inheritance tax.

The Chancellor confirmed that from April 2027, pension savings will be included in an individual’s “estate” and subject to inheritance tax. If you pass away before the age of 75, the person who inherits your pension is exempt from paying taxes on your retirement savings.

Those who inherit your pension will be subject to Income Tax when they take money out of it because it will be considered income if you pass away after the age of 75. Hargreaves Lansdown’s head of retirement analysis, Helen Morrissey, warned that the move will disrupt people’s later financial planning and likely cause a rush to give more money to loved ones while they are still alive.

She stated, Additionally, rather than leaving their pensions unaffected, they will attempt to spend them down as retirement income.

potentially bringing the remainder of an estate below the IHT threshold. As individuals seek to secure a guaranteed income and keep their estate below the inheritance tax threshold, we may also see an increase in interest in annuities.

According to Gary Smith, a partner and retirement specialist at Evelyn Partners, a wealth management firm, ” Savers and retirees have 18 months to evaluate their long-term strategies.

There will probably be more money taken out of pension pots as a result of the fact that defined contribution pension funds may now be subject to IHT on death of up to 40%. Since pension withdrawals are taxed as income, some drawdown savers will be keeping an eye on the frozen £50,270 threshold, at which point their entire income will be taxed at 40%.”

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