Independent article: - Should you be spend more or save more amid plans for pensions to come under inheritance tax?

For the average man in the street, inheritance tax on pensions is one problem they don’t need to worry about. For the vast majority of people saving for retirement, these reforms—whilst unwelcome—shouldn’t change their plans at all. Most already struggle to save enough for a comfortable retirement, so worrying about inheritance tax is an unnecessary distraction. Even many of those who could be affected may find the impact reduced as annuities regain popularity thanks to higher rates. Put simply, any money you use to buy an annuity—ignoring early death benefits—effectively escapes the inheritance tax net. The real impact will fall on the wealthiest, or on those who don’t spend enough of their savings in retirement. Unfortunately, that includes many of our clients, and that’s where our focus on inheritance tax planning will be. But for the average man in the street, this isn’t likely to be a problem.

There are two key questions you need to answer before you consider anything. Firstly is how much will you need over the course of your life and how are you going to fund that? The second is what is your attitude to inheritance tax - are you bothered or do you want there to be no tax bill? If you think you have more than you need and you want to reduce a bill then professional advice could be worth every penny. If you get your planning wrong it could make the bill worse or land your family with a big care bill.

“Pensions and IHT: one-size-fits-all answers don’t work” Now more than ever; the advice needs to be bespoke. The old rule of “pensions last” has been turned on its head by the proposed 2027 changes, but that doesn’t automatically mean everyone should rush to draw pensions first. The right approach depends on your tax rate, the likely tax position of your beneficiaries, and your overall goals. What we are seeing is more interest in gifting particularly gifts out of surplus income, as well as greater use of whole-of-life insurance, trusts, and business relief. But these are complex areas where a wrong move can backfire. Poorly timed withdrawals or gifts can have second-order consequences, such as unnecessary income tax bills or lost allowances. The key message is simple: don’t make knee-jerk decisions. With pensions becoming part of the IHT net, long-term planning has never been more critical.

For those nearing retirement, the old balance between drawing income and preserving capital now has to be reconsidered, because leaving too much untouched could invite inheritance tax. Even for people already in drawdown, the decision is shifting away from being purely about income tax efficiency and towards weighing that against potential IHT exposure. Younger savers face a different reality. The fundamentals of pensions remain attractive—tax relief on contributions, employer top-ups, and long-term tax-free growth still provide a strong case for building retirement wealth this way. At the same time, no one should assume today’s tax treatment is fixed forever. Future governments could reverse or adjust the legislation, meaning pensions might yet regain their position outside IHT. The key point is that pensions should continue to be viewed first and foremost as the cornerstone of retirement funding. Savers should continue to take advantage of their many benefits.