Changes in the pension rules have resulted in a sea-change in tax planning, says the Financial Times.
Before the change of pension rules, many people sensibly withdrew money from their pension fund and kept other assets untouched. However now that pension funds are exempt from inheritance tax, the coin has flipped meaning people will be much better off keeping money in their pension funds and spending other assets, as this will significantly reduce their inheritance tax bills.
If someone were to die before the age of 75, the whole fund will pass on to whoever they have nominated tax free. If they were to die after the age of 75, although tax is payable on withdrawal from the fund, many inheritors such as grandchildren will be able to withdraw from the fund tax free.
Since the introduction of these changes, it is predicted that many people will take advantage of the reduced inheritance tax bills and adjust their Wills accordingly.