Retirement savers are becoming increasingly anxious about forthcoming inheritance tax (IHT) changes that will bring pensions into the tax net from April 2027.
Analysts are warning that unclear legislation surrounding these reforms is prompting people to make rushed decisions about their retirement savings.
Some financial experts are sounding the alarm that the uncertainty is creating a perfect storm for fraudsters to exploit vulnerable individuals.
Some savers are considering withdrawing large sums from their pensions to avoid potential future tax bills, leaving them exposed to scammers promising fake "IHT-free" investment solutions.
Britons are being worried about the looming changes to inheritance tax, which will impact pensions
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However, hasty withdrawals remove the protection offered by regulated pension providers, significantly increasing the risk of falling victim to fraud.
Government data reveals that inheritance tax revenue reached £1.48billion, marking a £98million increase from the previous year.
This seven per cent rise stems from frozen tax thresholds that remain unchanged until at least April 2030, as announced in Chancellor Rachel Reeves's Autumn Budget.
The nil-rate band stays at £325,000, whilst the residence nil-rate band for homes passed to children or grandchildren remains at £175,000.
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From 2027, pension pots will no longer be exempt from inheritance taxGETTY Married couples can combine their allowances for a total of £1million. Currently affecting around four per cent of estates, inheritance tax is projected to impact over seven per cent by 2032-33, according to the Institute for Fiscal Studies (IFS).
Claire Trott, the head of Advice at St. James's Place, warns that "vague legislation and communication around how this will work" is leaving savers "unsettled and unsure about whether to continue putting money into their pension".
She cautions that some individuals might withdraw large sums from their pensions out of fear their families will face inheritance tax bills.
"This is particularly worrying as it can increase vulnerability to potential scams," Trott explained.
When savings are removed from regulated pension schemes, they lose crucial protection against fraudulent activity.
Those withdrawing funds without clear plans become prime targets for scammers offering bogus "IHT-free" solutions.
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Chancellor of the Exchequer Rachel Reeves announced the changes to inheritance tax during last year's Autumn Budget
PAFinancial experts are urging savers to seek professional guidance before making any pension decisions driven by inheritance tax concerns. "
"Anyone that is considering accessing their pension to avoid an IHT bill should seek financial guidance where possible, especially if they're taking money out without knowing what to do with it," advises Trott.
She emphasises the importance of being "armed with information about how to navigate the upcoming changes" whilst ensuring "hard-earned pension savings are kept safe from scammers."
Jonathan Halberda from Wesleyan Financial Services notes that inheritance tax is "no longer just a tax for the very wealthy, as it was initially designed," with more families being drawn into its scope.
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