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HMRC could bill state pensioners on their pension savings at a rate of an eye-watering and jaw-dropping 87 per cent. Retirees are being urged to "spend pension savings first" - or risk a staggeringly high 87 per cent tax bill. IHT changes under the Labour Party government and HMRC reforms over how it is levied could see thousands of families hit with massive bills as pensions are brought into the tax net for the first time. And Department for Work and Pensions, DWP , state pensioners could face a huge 87 per cent tax bill on their pension savings when new inheritance tax rules come in from April 2027. READ MORE 1.6 million drivers handed £160 fine 'after wanting to follow rules' The shake-up from the taxman means unspent defined contribution pensions will be included in inheritance tax calculations. When combined with income tax on withdrawals, families could lose almost 90 per cent of inherited pension savings in the worst cases. Labour expects around 10,500 more estates each year to face higher tax bills as a result. Jonathan Watts-Lay, Director at WEALTH at work, said alongside the findings: "For those who have already retired and have additional savings beyond their pension, a shift in thinking and strategy could be beneficial. "From an IHT perspective, it could now be better to spend pension savings first and preserve other assets for later on. This is the opposite approach to what has previously been the case," Mr Watts-Lay went on with his warning and also said: "People will need to review their individual circumstances and seek guidance and advice." "The focus should remain on making sure your pension provides the best possible income for your retirement, while keeping tax bills as low as possible," he advised. He went on, adding: "Many employers provide financial education and guidance in the workplace to help people understand their pensions including tax efficiency."
