Research from Standard Life revealed that 18% of over 55s are planning to pass on their tax-free pension cash to loved ones, to avoid incurring inheritance-tax (IHT) charges.
The survey, which spoke to 2,000 UK adults, found that men are more likely to do this than women (36% compared to 23%).
While pensions have become an attractive option for those looking to reduce IHT, due to the removal of the lifetime allowance (LTA) limit and an increased annual pension allowance, nearly a third (29%) of over-55s said they didn’t know this.
When asked if the amount that can be taken as a tax-free lump sum should rise in line with inflation, almost half (46%) of all respondents said it should. Around a third (30%) were unsure and 5% disagreed.
Dean Butler, managing director for retail direct at Standard Life, said: “Many people want to leave their assets to their children or other loved ones, and passing on your pension plan is now one of the most tax-efficient ways to do this.
“The announcement that the LTA would be scrapped in March’s Budget supercharged the attractiveness of defined-contribution pensions as a means of passing on wealth, and clearly a proportion of over 55s are intending to leave their tax-free lump sum untouched to make the most of this.
“It’s worth being aware that we could see more changes to pension-allowance rules in the future, but for now, the removal means there’s scope to pass on an unlimited sum tax-free for those who die before the age of 75 or at the beneficiary’s marginal rate after that age.”
