Nearly a third of people are unaware of how the upcoming changes to pensions and inheritance tax will affect them, says Hargreaves Lansdown.
From April 2027, unused defined contribution pensions will be counted as part of an individual’s estate for inheritance tax purposes.
However, Hargreaves Lansdown warned awareness of the changes is low, with 32% of those surveyed having no idea how these changes will impact them and their family.
Wealthier people are more likely to understand, with just 3% of additional rate taxpayers unsure. This compares to 23% of higher rate taxpayers and 35% of basic rate taxpayers.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “This is understandable as the more you earn, the more assets you are likely to have. But if you own your own home, and have a decent pension, then it’s something you need to be aware of so you can prepare, and perhaps, more importantly, make your family aware of any potential bill they may have to deal with.”
While married couples and civil partners have extra flexibilities in that assets of any value can be passed between them without being subject to inheritance tax, these flexibilities do not apply to cohabiting couples. Despite this, the investment platform said almost 40% of cohabitees remain in the dark about how the changes might impact them.
Morrissey said people should start to think about how they could be affected and consider reducing their liability by starting to gift away assets while they are still alive.
She explained: “Gifts of any value can be given and will pass out of your estate after seven years. There are also various other allowances that mean the money falls out of your estate for inheritance tax immediately. These include the £3,000 annual exemption.
“There’s also gifting out of surplus income rules, that enable gifts of any size to be made and leave your estate for inheritance tax purposes immediately. It’s important that you document your gifting behaviour and working with an adviser can help you stay the right side of the rules. However, you need to take a long-term view as you don’t want to risk giving away too much too soon and leave yourself struggling in later life.”
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