Martin Lewis has given a warning to pensioners aged 75 or over (Image: Getty)
Money saving expert Martin Lewis has issued a new warning to pensioners over 75 when it comes to paying Inheritance Tax on a pension.
In his latest personal finance newsletter he explains that under current rules you do not pay the tax on a pension. But that is set to change he says.
Putting into a pension is something many people do, often for decades, so they’ll have an income to live off once they retire from working. In that time it’s quite possible to save £10,000s, £100,000s or even millions into your post work pot.
But at the moment, if you die and there’s money left over in your private pension it’s not treated as part of your ‘estate’, meaning there’s no Inheritance Tax to pay on it.
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However, in Rachel Reeves’ first Budget in October, he writes, she announced from April 2027 pensions will be eligible for Inheritance Tax, though the exact regulations aren’t in place yet. It’s worth noting however that only six per cent of estates have to pay Inheritance Tax, and while that will rise when pensions are included, it’s still likely to be only eight per cent who pay it.
Martin wrote: “That’s not the only tax though. Currently, die aged under 75, and with a Money Purchase pension or drawdown, your beneficiaries can usually take money out tax-free.
“If you die aged 75 or over, their withdrawals are usually taxed at their normal tax rate on income (or some of what’s taken may even push into the higher band). That will also remain from 2027, meaning the pension you leave behind could be double-taxed for some.”
For more information on inheriting a pension, click .
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In other Martin Lewis news, he has also issued a warning to pensioners who could have “£10,000s hidden” as he warns there is more than “31billion sitting in lost, old pensions”.
His latest “MoneySavingExpert’s Money Tips Email” contains his “16 Pension Pumpers – Tips, tricks & must-knows to boost your private & work pensions by possibly £10,000s.”
Martin, who also works as a presenter for ITV’s Good Morning Britain and This Morning and presents The Martin Lewis Money Show, warns pensioners that there are billions sitting in old, “lost” pensions and many people now “lose track” as they pay into pensions without being asked to.
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