Inheritance tax Why richer retirees are splashing out

People are taking big sums from pension pots to gift to their children or spend on a holiday, writes Rupert Jones

- Rupert Jones

Financial companies are reporting a "huge" increase in well-off older people withdrawing sizeable sums from their pensions to splash out on family holidays and give to their children.

This wave of spending and gifting has been triggered by the chancellor Rachel Reeves's decision to launch what some have called an "inheritance tax raid" on unspent pension money - thereby lobbing a grenade into many older people's financial planning, say critics.

Many well-off older people would have been planning to leave unspent pension savings to their children or grandchildren but the shake-up announced in last October's budget, which is due to take effect from April 2027, means this money could be liable for inheritance tax (IHT).

As a result, large numbers of people are taking action now to avoid being landed with a bill that, for some, could run into six figures.

"Many of my clients have opted to adjust their financial plans to make the most of their money now and ensure no more than is necessary ends up in the hands of the taxman," says Ian Cook, a chartered financial planner at the investment firm Quilter Cheviot.