New pension tax rule could leave families with just 33p of every £1 inherited

A financial adviser warns that from April 2027, most unused pension funds will be included in estates for inheritance tax, potentially leaving families with just 33p of every £1 inherited due to combined tax rates. The change means pensions could first face 40% inheritance tax, then up to 45% income tax on withdrawals, creating a possible 67% effective tax rate. This alters previous assumptions that pensions passed tax-free, prompting retirees to reconsider asset drawdown order. HMRC estimates 10,500 estates will newly become liable, with 38,500 facing larger bills, averaging £34,000 extra. Advisers urge reviewing wills and nominations early, warning against hasty withdrawals or gifts that could harm retirement security.