Tackling inheritance issues raised by retirement savings and pensions 

Jun 20, 2022

Life can be incredibly hectic, but it is still important that we make time to think about the future – including how we will live comfortably when we retire.  

Saving for retirement is vital, as it could ensure you get the best from life. But, have you ever considered what might happen to these funds when you pass away? For example, will your loved ones have to pay inheritance tax (IHT) on them? 

Pensions and inheritance issues

GOV.UK outlines some of the key issues around tax on a pension you inherit. For example, individuals do not usually pay IHT on a lump sum payment, as the payment is generally classed as discretionary. 

Of course, it is worth remembering that some people might not just rely on pensions for retirement savings. ISAs may be part of their plans, but the rules in this area are different. Perhaps most notably, GOV.UK states that ISA investments will be classed as part of an estate for IHT purposes.

Dicky Davies, Business Development Director at Tower Street Finance, said: “People can take a range of approaches towards saving for retirement, but this can create issues when it comes to inheritance and tax. 

“For instance, if a person has made use of ISAs, their loved ones could be left facing a surprising bill for IHT. Fortunately, if this happens, we can help. Our IHT Loan can provide support when there is a liability to pay, but no available funds. The loan can be used to pay HMRC, with the estate subsequently repaying the funding.” 

Dicky added: “Even if funds are in a pension, families could face delays in relation to distribution. This may lead to all kinds of issues, including further legal and administration fees, as well as property maintenance and insurance costs. However, if such problems emerge, our Estate Expense Funding could help. This might also be useful to solicitors and estate administrators, as longer waits on distribution may mean it could take more time for fees to be paid. 

“Another product that could help in the event of delays is the Inheritance Advance, as it allows you to receive some of your inheritance early to pay for a range of things. 

“Ultimately, handling inheritance issues in relation to retirement savings can be tricky. However, help is always at hand.” 

Find out more at about our Inheritance Tax Loan product or call us on 0343 504 7100.

Savings and inheritance
Share This