Pension savings will form part of inheritance tax calculations from 2027 and many retirees are already taking steps to avoid charges now
The article from MSN discusses potential changes to inheritance tax (IHT) in the UK, particularly focusing on how these changes might affect pensions. It highlights that while pensions are currently exempt from IHT, there's speculation that Chancellor Jeremy Hunt might alter this rule in upcoming budgets. The article advises on several strategies to protect one's pension from potential tax changes:
Maximize Pension Contributions: By contributing as much as possible to pensions, individuals can reduce their taxable estate. The current annual allowance is £40,000 or 100% of your salary, whichever is lower, with a lifetime allowance of £1,073,100.
Use Pension Drawdown: Instead of buying an annuity, using drawdown allows for more flexibility in managing pension funds, potentially reducing the taxable estate.
Consider Spousal Bequest: Pensions can be passed to a spouse or civil partner tax-free, which could be a strategy to keep wealth within the family without incurring IHT.
Review Estate Planning: Engaging in estate planning, including setting up trusts or gifting, can help manage IHT liabilities.
Stay Informed: Keeping up-to-date with government announcements and policy changes is crucial for adapting financial strategies accordingly.
The article emphasizes the importance of proactive financial planning to mitigate the impact of any future tax changes on pensions.
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