With less than a year to go until pensions are brought within scope of inheritance tax, a major pension company has issued a warning about the increased risk of scams.
Research from Standard Life has highlighted how uncertainty surrounding the changes could make savers more vulnerable.
Here, we look at how inheritance tax rules are changing and how you can protect your pension against fraudsters.
High levels of concern around inheritance tax changes
The research by Standard Life reveals a high level of concern about the forthcoming inheritance tax changes.
Some 22% of UK adults say that they feel less confident about pensions as a result, while 54% are worried their beneficiaries could face a higher inheritance tax bill when they die.
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.’
He added: ‘It’s worth being aware that these changes won’t affect everyone in the same way – and that’s something scammers could be quick to exploit. 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.’
What the new rules mean for your pensions
At present, pensions are not included in your estate when its value is calculated for inheritance tax purposes. But from April 2027, unused defined contribution (DC) pensions will count towards the value of your estate.
If the total value of your estate, including any money left in defined contribution pensions, exceeds the available inheritance tax allowances, tax at 40% will be due on the amount above those limits.
If you have a defined benefit pension, this will often continue to pay out to your spouse or civil partner when you die. But these payments will not be affected by the new rules and will not form part of your estate for inheritance tax purposes.
Government estimates suggest that the changes will result in 10,500 estates paying inheritance tax for the first time in 2027-28, while 38,500 more will see their bills increase (by around £34,000 on average).
However, most estates will continue to fall below the inheritance tax thresholds. The proportion of UK deaths resulting in an inheritance tax bill will rise from 5% to around 10% by 2029-30.
- Find out more: how to prepare for the upcoming inheritance tax changes
Pension withdrawals on the rise
The changes are already leading to more people accessing their retirement savings and reviewing how their money can be passed on to loved ones.
Our recent survey of Which? members found that one in seven are already spending more of their pension in anticipation of the changes. And almost half of respondents said they plan to do the same.
Pension savers withdrew £3.9bn in lump sums from DC pensions between October 2024 (when the inheritance tax changes were first announced) and October 2025 – an increase of £868m on the previous 12-month period.
More money being released from pensions and uncertainty about how the rules apply will only encourage criminals to devise new ways to target your cash.
- Find out more: rules for taking a tax-free lump sum from your pension
4 pension scam warning signs
Here are the key red flags to watch out for:
- Being contacted out of the blue Criminals often target you with out-of-the-blue emails, calls or messages. Even though cold-calling about pensions was banned in 2019, scammers may still try to make contact in this way, so it’s important to treat unsolicited approaches with caution.
- A company you’re not sure about If you’re speaking to a company about your pensions, it’s important to confirm the firm or adviser’s credentials using reliable sources such as the Financial Conduct Authority’s firm checker. Don’t automatically trust the information provided to you – do your own research to ensure they’re authorised.
- Promise of early access to your pensions Fraudsters may tell you that you can access your pension savings before the minimum age of 55 (which is rising to 57 from 2028). This is a common sign of a scam. As well as putting your savings at risk, it may also result in a significant tax bill.
- Being asked to make a quick decision Scammers may attempt to get you to make a rapid decision by suggesting an opportunity is time-limited or exclusive. Taking time to think things through and seeking a second opinion can help you avoid making decisions you might regret.
If you’re uncertain about what to do with your pension, you can get help from either Pension Wise, the government’s free retirement guidance service, or from a regulated financial adviser.
Which? Money members can also access 1-to-1 guidance from our money experts as part of their subscription.
