Inheritance tax alert: Britons rush to withdraw pension savings to avoid Rachel Reeves's raid

Britons are rushing to take money from their pension savings to avoid Chancellor Rachel Reeves's looming inheritance tax (IHT) raid, experts claim.

New research from Wesleyan reveals that nine out of ten financial advisers have witnessed clients speeding up their pension withdrawals in response to forthcoming changes to the HM Revenue and Customs (HMRC) regime.

The findings come as savers prepare for reforms taking effect in April 2027, which will bring unused pension pots within the scope of IHT calculations for the first time.

This marks a significant shift in retirement planning behaviour, with clients seeking to reduce the value of pension funds that could be subject to the 40 per cent death duty.

The surge in accelerated drawdown activity has prompted widespread concern among advisers about potential consequences for long-term financial security.

According to the Wesleyan study, three-quarters of advisers reported that their clients are boosting annual pension withdrawals by between five per cent and 15 per cent due to concerns about the impending tax changes.

A further 18 per cent of financial professionals said they had observed even more aggressive behaviour, with clients increasing their drawdown rates by more than 16 per cent

The research highlights significant anxiety among advisers regarding the sustainability of these accelerated withdrawal strategies..

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Nine in ten financial professionals expressed concern about volatility drag, the phenomenon whereby market fluctuations gradually erode investment returns over time.

Similarly, 88 per cent of advisers said they were worried about sequencing risk, which occurs when poor investment performance early in retirement undermines the long-term viability of withdrawal plans.

Advisers also flagged risks to their own businesses, with 93 per cent stating that heightened market volatility during accelerated drawdown periods threatens their recurring income streams.

To counter these risks, advisers are adjusting client portfolios with a range of protective measures. Almost two thirds are turning to smoothed funds, which use actuarial adjustments to even out market volatility and deliver more consistent returns.

Nearly half are pursuing greater diversification across their clients' investments, while 45 per cent are directing money towards specific sectors or markets.

****Karen Blatchford, the managing director of Distribution at Wesleyan, said: "While it's understandable that clients are looking to act ahead of IHT changes, advisers know that increasing withdrawal levels can have significant consequences, especially in the uncertain and volatile market conditions we're experiencing today.

"That makes it vital that any changes to withdrawal strategies are supported by robust planning and advice to help clients maintain long-term financial resilience."

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