Millions of savers are being urged to “protect” their pensions after sweeping inheritance tax changes risk leaving families thousands of pounds worse off.
Under new rules, the average bill for affected households is set to rise by around £34,000, while thousands more estates will be dragged into paying inheritance tax for the first time. The warning comes amid growing concern that confusion over the shake-up is being exploited by criminals targeting retirement savings. Research by Standard Life suggests anxiety is already widespread.
More than half of adults (54%) fear their loved ones will face a bigger tax bill when they die, while 22% say the changes have made them feel less confident about pensions.
Mike Ambery, retirement savings director at Standard Life, said: “It’s understandable that many people are reassessing how their retirement savings are used and passed on.
“However, scammers thrive on fear and uncertainty – when people feel unsettled or rushed, they’re more likely to fall victim to a scam.”
What’s changing
From April 2027, unused defined contribution pensions will be counted as part of your estate for inheritance tax purposes – a major shift from the current system.
That means:
- Estates exceeding tax-free thresholds will face a 40% inheritance tax charge
- Around 10,500 estates will pay inheritance tax for the first time
- A further 38,500 will see their bills rise – by £34,000 on average
Despite this, most estates will still fall below the threshold, although the proportion paying inheritance tax is expected to double from 5% to around 10% by the end of the decade.
Defined benefit pensions, typically paid to a surviving spouse or civil partner, will not be affected by the changes.
Rush to withdraw cash
The looming reforms are already changing behaviour. Figures show savers pulled £3.9bn from pensions in lump sums in the year after the changes were announced – up £868m on the previous period.
Separate research from Which? found:
- One in seven people are already spending more of their pension
- Almost half plan to do so in future
Experts warn that this surge in withdrawals, combined with uncertainty, is creating fertile ground for scams.
The four warning signs of a pension scam according to Which? Money
Savers are being told to stay alert to common tactics used by fraudsters:
- Cold contact
Unexpected calls, texts or emails about pensions should ring alarm bells – even though cold-calling has been banned. - Unfamiliar firms
Always check credentials via the Financial Conduct Authority register rather than trusting what you’re told. - Promises of early access
Offers to unlock pensions before age 55 (rising to 57 from 2028) are a classic red flag and can trigger hefty tax penalties. - Pressure to act fast
Scammers often create urgency to stop you thinking things through or seeking advice.
Where to get help
Savers unsure about their options are urged to seek guidance from Pension Wise or a regulated financial adviser.
Experts stress that while the changes sound alarming, they will not affect everyone – and rushing into decisions could prove costly.
As Mr Amberry added: “For many people, their pension savings simply won’t be large enough to fall into inheritance tax at all – but fraudsters may still try to convince them they need to act urgently.”