UK Families Rush to Boost Children’s Pensions Before 2027 Tax Change, June 14

Starting April 6, 2027, the Labour government will include untouched pension pots in inheritance tax calculations for the first time. This change means families will face a 40% levy on pension assets passed to heirs, catching millions who never expected an inheritance tax bill. Families are now rushing to fund children’s pensions before the new rules take effect.

Junior SIPPs See Record Surge

Junior Self-Invested Personal Pension (SIPP) openings have jumped 158% as families move to lock in tax advantages before April 2027. Parents and grandparents are now funding these accounts to shield assets from the new inheritance tax rules. The surge reflects a broader shift in wealth transfer strategies as the deadline approaches.

How the New Tax Rule Works

From April 6, 2027, any untouched pension pot will be included in inheritance tax calculations when an estate is passed to beneficiaries. Estates will face the standard 40% inheritance tax rate on these pension assets. Experts warn that families who delay planning could lose thousands of pounds in avoidable tax liabilities.

Planning Early Saves Hundreds of Thousands

Research from Octopus Investments shows that wealthy households starting estate planning at age 50 can bequeath £397,000 more to heirs than those who wait until age 70. The difference between early and late planning multiplies across the country into billions of pounds in lost legacies. Kristy Barr, Head of Retail Investments at Octopus, said most wealth lost to inheritance tax comes from no planning at all, not bad planning.

Broader Concerns About Tax Policy

Julian Morse of stockbroker Cavendish warned that a swing to higher taxes could damage growth. He argued that higher tax economies always grow slower than lower tax ones. Morse also noted that stocks on London’s junior AIM market have lost inheritance tax advantages under Labour, further dampening investor confidence.

Final Thoughts

Families have less than 10 months to act before inheritance tax rules change. The data shows early planning saves hundreds of thousands in tax. For savers, this is a time-sensitive opportunity to restructure assets before April 2027.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.