Savers are not making plans to protect their legacy, despite pension reforms that could help reduce their family’s inheritance tax bill, according to Zurich.
Research carried out by YouGov for the insurer found that just 18 per cent of more than 2,000 UK adults said leaving an inheritance was an important factor to consider when planning for retirement.
Just 21 per cent of Britons with children in their household said leaving an inheritance was an important factor to consider, while 19 per cent of people aged 55 and over were considering inheritance to be a priority, falling to 14 per cent for those aged 45-54.
In light of these results, Zurich warned that savers who do not plan ahead could see their inheritance taxed more heavily, despite rule changes making it easier to spare loved ones from large inheritance tax bills.
Under the pension freedoms, up to the age of 75, pension pots can now be passed on tax free, unlike other investments and savings accounts, which are still subject to inheritance tax.
However, if a person dies after the age of 75, their beneficiaries can take the pension as income, which would be taxed at their marginal rate - 20 per cent for most - or as a lump sum, where up to 45 per cent tax would be applied.
Alistair Wilson, Zurich’s head of retail platform strategy, commented that with fewer than one in five saying it’s important to consider inheritance in their financial plans for retirement, many could end up handing over more of their family’s inheritance to the taxman than necessary.
“Pensions are now a valuable way to pass on wealth, but savers need to make the right decisions early. For some retirees, it could now be more tax efficient to live off assets such as savings accounts and Isas that would be liable for inheritance tax, before tapping into a pension.”
ruth.gillbe@ft.com
