Pensioners who haven't touched their pension pot warned over 'deadline'

State pensioners have been warned to watch out for a inheritance tax deadline in 2027. Pensioners and OAPs may be forced to completely rethink their pension pots as experts explain who will need to take action and when after the Labour Party Budget.

Felicia Hjertman, CEO of TILLIT, says the lack of National Insurance pension contribution changes as a “welcome relief” and “reassuring step forward." But she warned eight in 10 households are on track to fall short of a comfortable retirement.

And after April 2027, unused pension pots will be liable for Inheritance Tax which used to be the norm prior to 2015. She said: "the Government continues to face a significant challenge: creating stronger incentives for both employees and employers to prioritise private pension savings.”

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David Piltz, CEO of Gallagher Benefits Services, said in a warning after Rachel Reeves' speech: “We hope that the final position does not result in a wider impact on this valuable aspect of pension saving with a knock-on erosion of confidence in retirement planning.”

Private pension wealth will be subject to inheritance tax from April 2027 under the Chancellor’s Budget plans announced on Wednesday. However, almost all of the burden will fall on the families of former private sector workers, experts have warned.

Pensions consultants and wealth managers said the move will “widen the gulf” between “gold-plated” public sector pensions and defined contribution (DC) schemes common in the private sector. Ian Cook, of wealth manager Quilter, said: “Rachel Reeves has spared the public sector and widened the gulf between DB and DC pensions.

“Some families of private sector workers will find themselves on the sharp end of an unexpected tax bill, whereas public sector workers can continue to provide for their spouses in the event of their passing." He said: “If a beneficiary of a DB pension who is not a spouse or civil partner inherits an estate that is above the inheritance tax threshold and a lump sum death benefit is paid out, then this benefit will be subject to inheritance tax. This is almost the only scenario in which DB pensioners will be affected.”