Pensioners savings are in the Treasury’s sights (Image: Getty)
The Treasury is set to rake in billions of pounds each year because of the “gold mine” of inheritance tax on , experts have said.
The change, which comes into force in April 2027, will raise £640million in the first year, followed by £1.3billion in 2028-29 and nearly £1.5billion in 2029-30.
But estimates by financial firm LCP suggested that this figure will rise sharply through the 2030s and beyond, raising well over £3billion a year at its peak.
The total raised from the change could “easily” exceed £40billion over the next two decades, the analysts said.
Tim Camfield, senior consultant at LCP said: “Applying inheritance tax to pension balances could prove to be a real gold mine for the government for many years to come.
“The surge in defined benefit pension transfer activity, which we witnessed in the late 2010s, will dramatically increase the number of people whose estate includes a significant direct contribution pension balance.
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“Some may react to the tax changes by drawing down on their pension assets faster but that will still generate significant tax revenue, as such withdrawals will be subject to income tax.
“Either way, as the direct benefit transfer generation gets older, the Government will start to see a multi-billion pound revenue stream from the income tax or inheritance tax on their pension pots”.
Experts believe tens of billions in tax – either from inheritance levies on death or income tax if people take the money out early – will be heaped on Britons over the coming years.
They said none of this appears in the Treasury red book – which includes details of the Government’s budget – because it only provides revenue estimates up to 2029/30, which is before the “real revenues start to flow”.
Chancellor has faced renewed calls to scrap “Britain’s most hated tax” after the country’s inheritance tax receipts ballooned.
Inheritance tax bills totalled £6.3billion in the nine months to December – £600million higher than the same period the previous year.
The Office for Budget Responsibility expects the inheritance tax bill to hit £8.3billion in 2024-25 and an eye-watering £13.9billion in 2029-30.
There were a number of changes to inheritance tax at the Chancellor’s first budget in October.
This included an extension to the freeze on inheritance tax thresholds, which have been frozen for a further two years until 2030.
Around 4% of deaths result in an inheritance tax charge but this could rise to 10% by 2030
Agricultural Relief and Business Property Relief have been reformed, meaning that from April 2026, the first £1million of qualifying combined assets will have no inheritance tax at all, but for assets over £1million a 50% relief will apply, at an effective rate of 20%.
And from April 2027, inherited pensions could be subject to inheritance tax.