Avoid Inheritance Tax with a Pension Move? Beware of Fraudsters’ Claims!

An enticing phone call offers a seemingly incredible deal. They suggest transferring your pension savings to an international scheme that promises to shield your funds from the upcoming changes to the UK’s inheritance tax (IHT) laws.

Starting from April next year, funds remaining in a defined contribution pension plan after one’s demise, which includes most workplace pensions and all private pensions, will be subject to IHT.

The impending modification is causing significant worry, making the pitch sound appealing. However, this alleged scheme is a fabrication by criminals looking to take advantage of people’s fears.

One of the UK’s major pension providers, Standard Life, has issued warnings that such scams are likely to increase as the April 2027 changes approach.

While the new rules won’t impact everyone – the basic IHT-free allowance for an estate is £325,000 – scammers will exploit any confusion to persuade individuals to transfer their pension funds, according to Donna Walsh from Standard Life.

“Amid these changes, there’s a lot of uncertainty and confusion about what actions people can take, and what the consequences will be. These are precisely the conditions under which scammers thrive,” Walsh explains.

Recognizing the Scam

These scams typically begin with unexpected emails, phone calls, or messages.

They might propose a free pension review or access to a high-return investment or scheme, often based abroad.

Scammers commonly use terms like “pension liberation”, “loan”, “loophole”, “savings advance”, “one-off investment”, and “cashback”, according to The Pensions Regulator.

They frequently create a sense of urgency, claiming that the offer is time-sensitive to pressure the victim.

Once an individual agrees to transfer their funds, scammers coach them on how to answer potential questions from their pension provider, who asks these questions to safeguard the saver’s interests.

“Our teams are specifically trained to recognize when someone is being coached by a scammer,” says Walsh.

Steps to Take

Be cautious if you receive a phone call about your pension. Remember, cold calling about pensions is illegal in the UK, so any unsolicited pension offers should be treated with high suspicion.

Fraudsters aim for you to act quickly and without consultation, so avoid hasty decisions and seek advice from a reliable source.

You can use the Financial Conduct Authority’s online tool to verify if a company is authorised. For any pension changes, consider speaking to a regulated financial adviser. The government-backed MoneyHelper service can assist in finding one.

Mike Ambery of Standard Life notes, “Individuals with substantial savings might be considering how to best pass on their wealth, especially in light of potential inheritance and income taxes on pensions for beneficiaries. While some may need to plan long-term or consider gifting, remember that solutions are rarely one-size-fits-all. It’s crucial not to rush into decisions, particularly if pressured with quick-fix solutions or tactics that prey on fear.”

If you suspect a scam, it should be reported immediately to Report Fraud.