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MoneyWeek article- how to ringfence your money from pension/iht changes

Journalist: Marc Shoffman, Freelance

ended 20. March 2025

Helloo, I am writing a piece for MoneyWeek this morning looking at how people could ringfence pensions from inheritance tax.

Is there a way to protect pensions from inheritance tax before/after the changes in 2027?

Are you seeing more people accessing their pensions now amid the upcoming IHT changes? What are they doing with the money, e.g spending it? putting it in an ISA? 

Is there a risk of taking too much money out in fear of inheritance tax as you don't actually know when you will die?

5 responses from the Newspage community

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Editor
Pete Mugleston
Mortgage Advisor & Managing Director at onlinemortgageadvisor.co.uk
Pensions are one of the most tax-efficient ways to pass on wealth, as they currently sit outside of inheritance tax (IHT). However, with changes expected in 2027, more people are reviewing their options. Some are withdrawing funds early to move money into ISAs or gifting to family, but this comes with risks – taking too much too soon could leave them short in retirement. While it’s wise to plan ahead, pensions remain a powerful estate planning tool, and accessing them purely out of IHT fear could be a mistake. The key is balancing tax efficiency with long-term financial security.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
Pensions are still a great tool for financial planning. However, with the changes to the inheritance tax treatment of them, we now need to factor in the impact this might have on the families of clients in the future.

There's no direct way of ringfencing the money in a pension from inheritance tax once the rules change in 2027. However, for clients of ours that will be affected by the changes, we're looking at sheltering other assets they have from inheritance tax; for example using trusts, or putting in place strategies to cover the potential tax bill using insurance.

Once pensions are included in the taxable estate, this can have a double-whammy effect for some clients of also causing them to lose their "Residence Nil Rate Band".

For a married couple, this can mean going from previously having £1m of assets passed on tax-free, plus whatever is held in pensions, to only £650k of assets passed on tax-free and everything else taxable at 40%!
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David Belle
Founder and Trader at Fink Money
I know of someone who is looking at this right now.

He has an £8m house.

If his daughters are higher rate taxpayers, they would effectively be taxed about 60% with these new rules.

His only option is to sell up and move abroad. That is the reality.
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Colin Low
Managing Director at Kingsfleet
It’s really much too early to say. The consultation has only just finished and the changes aren’t due to take effect until April 2027.

A lot can change in people’s health in 2 years and, until then, personal pensions remain a highly effective way of passing on assets to future generations.

Clearly, when matters become clearer and the deadline approaches, it may require a change in strategy but if you’re seeing your adviser regularly, they will keep you updated.
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Steve Humphrey
Adviser & Founder at The Mortgage Pod
Pensions have long been a tax-efficient way to pass on wealth, but with the 2027 changes, planning is more crucial than ever. Currently, pensions sit outside of an estate for IHT, remaining tax-free if the holder dies before 75, with beneficiaries paying income tax after that. Post-2027, inherited pensions will be taxed at the recipient’s income tax rate, potentially pushing them into higher brackets. As a result, some are accessing pensions early, moving funds into ISAs, gifting money, or spending it, but this comes with risks—withdraw too much, and you could face unnecessary tax or outlive your savings. The biggest challenge? No one knows their expiry date, so balancing pension access with long-term financial security is key.