An expert has issued a £3,000 HMRC tax alert for savers, warning that only 42 per cent of adults say they have a clear understanding of the options available when taking money from their pension. Among those aged over 55, the figure rises only slightly to 45 per cent, according to research by investment experts Hargreaves Lansdown.
Expert Warning on Pension Confusion
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "This can lead to not having enough income, potentially running out of money, or incurring huge tax bills that needn't have happened. All can have a huge impact on your standard of living, and all are avoidable."
Inheritance Tax Rule Change
From April 2027, leftover private pensions will be included in inheritance tax calculations. Estates above £325,000, or £500,000 if a home is left to children or grandchildren, face a 40 per cent tax rate. Annual gifting allowances and the seven-year rule can reduce the size of an estate.
Keeping records of gifts and planning ahead are essential to minimise future tax bills. Retirees with defined contribution pensions can normally access their savings from age 55, rising to 57 from 2028.
Most people can take up to 25 per cent of their pension tax-free, subject to a maximum tax-free amount of £268,275 across all pensions. The main options are pension drawdowns, annuities, and lump sums.
A recent survey found that nearly one in five savers aged 65 or above have already started gifting money in response to the changes. Many are choosing to help with costs like university fees or house deposits now, while also reducing the size of their estate.
