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Since 2015, savvy savers have been using their pensions to safeguard their wealth for future generations.
But now Chancellor Rachel Reeves has blown up the tax plans for a generation.
A decade ago, then-chancellor George Osborne abolished the “pensions death tax”, which meant money left unspent inside a pension account would not be caught by inheritance tax on death. Instead, it was taxed at the income tax rate of whoever inherited it when they withdrew the cash.
It opened up a golden opportunity to pass money down the generations, potentially indefinitely.
Now that has all changed and many people, like Dennis Canty, are furious.
“The ordinary person has been hit again,” says Mr Canty, 63, from High Wycombe.
“We had been investing in our pension to get around inheritance tax. To be honest, if we had the funds we’d move the money abroad, but we don’t, that is not an option for us.
“We’re looking at gifting to our kids sooner than we were going to. We just want to provide our children with a solid foundation for their future, which seems very unstable at the moment.”
Inheritance tax is infamously Britain’s most hated tax, even though relatively few estates have historically ended up paying it. It is the principle of “double taxation” that angers people, even those who know they will never personally be affected.
However, the latest changes mean increasing numbers will end up with a tax bill – government figures suggest some 10,000 more families will be stung as a result of Ms Reeves’ changes, and 38,500 will end up paying more. Nevertheless, people are concerned they will be directly affected.
Wealthier pensioners’ tax planning strategies have been turned on their heads as a result.
