London-based Grunberg & Co. is advising individuals to take action in response to the recent Autumn Budget announcement that will significantly alter Inheritance Tax (IHT) planning.

From April 2027, unspent pension pots will come under the scope of IHT, which is expected to affect around 8 per cent of estates annually.

Previously, pensions were considered an effective vehicle for estate planning due to their exemption from IHT, but now with its removal the financial implications of these changes are significant.

Nimesh Patel, Tax Partner at Grunberg & Co., encourages individuals to assess how much they retain in their pensions to prevent their loved ones from being subjected to IHT liabilities.

Nimesh says: “Individuals will need to re-assess how much they retain in their pension. To protect your family from this new tax liability, you should consider restructuring your pension arrangements to ensure that assets are passed on to spouses or civil partners, who remain exempt from IHT.”

“With the potential for a large portion of pensions to be taxed, many individuals may need to rethink their estate plans and wills to mitigate future tax exposure.

“This could include looking at alternative savings and investment vehicles.”

Grunberg & Co. also anticipates a shift in strategy for families with businesses.

“Family-run companies may need to review which pensions they contribute to and consider contributing to pensions held by younger family members, allowing for the deferral of tax liabilities,” Nimesh suggests.

For those concerned about the impending changes, accessing pension pots sooner could offer some benefits.

“By extracting income in a tax-efficient manner now, clients can reduce their potential Inheritance Tax exposure later on,” Nimesh advises. “However, it will be important to weigh the risks and benefits of accessing these funds early.”

Grunberg & Co. is committed to helping clients understand these changes and make informed decisions regarding their estate planning strategies.