Many of us have become increasingly aware of how inheritance tax (IHT) might impact the legacy we leave behind. It is an instinct to want our hard-earned savings to go to our loved ones rather than the taxman. However, this desire has created a perfect opening for fraudsters who are now targeting pensioners with sophisticated tax-dodging schemes. Read on for more information.
How the Scam Works
The pitch usually kicks off with a sense of panic. You might be told that new government rules are coming or that your current provider is wasting your money on taxes. They’ll promise to move your funds into a special vehicle that bypasses the taxman entirely, backing it up with slick websites and professional-sounding jargon. It’s designed to look like legitimate financial advice, which is exactly why it’s so easy to fall for.
If you are reviewing your long-term financial arrangements, our estate planning guidance blog section contains further practical advice.
The Reality of Pensions and IHT
The irony of these scams is that most modern defined-contribution pensions are already quite tax-efficient for inheritance. In many cases, if you pass away before the age of 75, your beneficiaries can inherit your pension pot tax-free. Even after 75, the tax implications are often far more manageable than the scammers would have you believe. By moving your money into an unverified “trust” or an unregulated investment scheme, you aren’t just trying to avoid tax; you are removing your money from the protection of the Financial Conduct Authority (FCA). Once that money is moved, it is often tied up in high-risk investments or siphoned into fraudsters’ accounts.
Understanding the warning signs of pension scams can help you avoid costly mistakes.
How to Protect Your Wealth
It is vital to remember that legitimate financial advisers will never cold-call you out of the blue to suggest moving your pension. Here are a few ways to stay safe:
Check the FCA Register – Before making any move, check if the Financial Conduct Authority authorises the firm or individual. If they aren’t on that list, walk away.
Be Wary of Guaranteed Returns – If a scheme promises high returns with zero risk and a “secret” tax loophole, it is almost certainly too good to be true.
Seek Independent Advice – If you are genuinely concerned about inheritance tax, speak to a qualified, independent financial adviser whom you have sought out yourself.
Don’t Be Rushed – Scammers rely on pressure. Take your time, do your research, and never sign anything on the spot.
You can also explore our inheritance tax resources to better understand how pensions may form part of your estate.
In Conclusion
Planning for the future is important, but the best way to protect your family’s inheritance is to keep your pension exactly where it belongs: in a regulated, secure fund. Don’t let the fear of tax lead you into the hands of a fraudster.
If you need help drafting a will or locating one, contact Braintree Wills for advice.