The Chancellor's announcement indicates a significant change in pension tax treatment, removing the IHT-free status of defined contribution pensions from April 2027, which alters long-term financial planning.
Pension pots, previously seen as tax-efficient, will now be subject to inheritance tax, compelling retirees to rethink their withdrawal strategies and overall estate planning.
The end of the IHT-free status for defined contribution pensions is likely to lead to a shift in retirement funding priorities as savers weigh their options more carefully.
This adjustment consolidates the differences in pension systems, impacting defined contribution savers significantly compared to final salary schemes, potentially increasing the divide in pension benefits.
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