Is your family at risk of receiving an unexpected tax bill? How to inform your loved ones

Many families are not keeping up with the financial aspects of inheritance and retirement planning

Even with careful and well-crafted retirement and inheritance plans, if you leave your family in the dark, they may have unforeseen expenses to cover, particularly in light of impending changes that will include pensions in inheritance tax (IHT) calculations.

Pensions Awareness Week begins today, Monday, September 15, and studies reveal that a concerning proportion of British citizens are either ignorant of impending pension reforms or have not yet shared their retirement and inheritance plans with their family.

According to research from the Investment Association, only one in three (35 percent) UK adults discuss their retirement plans with their partner, and nearly half (45 percent) don't discuss them with anyone.

"We want to see retirement planning and pensions become a common topic of conversation, with people being able to access the professional support and guidance they need," stated Imran Rasvi, the Investment Association's senior policy adviser for pensions and institutional markets.

"People now have to navigate a more complex retirement provision landscape," Razvi added. This includes figuring out how much they must pay into their pension fund during their working years and how to use the money they have saved to support themselves in their later years.

There is no one-size-fits-all approach to retirement, but talking to loved ones and getting help from professional advisors and pension providers can help ease any difficulties.

Schroders' personal wealth: half of British people are not ready for old age.

One of the most difficult pension-related topics that many families are unaware of is the impending reforms that will include pensions in the computation of inheritance tax (IHT).

Over half (51 percent) of British citizens are not aware of the impending changes, which will go into effect in 2027, according to the Schroders Personal Wealths (SPW) retirement report 2025. 85 percent of people do not fully understand the inheritance tax rules, according to the report, even though 29 percent of people intend to leave their pensions to their descendants.

Alex Gaita, director of financial planning at Schroders Personal Wealth, stated that retirement planning is not a standalone process. It is influenced as much by changing laws and governmental decisions as it is by individual objectives. The most concerning statistic is probably that 25% of people have no financial plan at all, and nearly half (43%) do not have an updated retirement financial plan. Of those surveyed, 60% have never discussed retirement with a financial advisor.

"Too many are planning for the future based on assumptions, not facts," Gaita said, citing the possibility of changes to tax laws and the new uncertainty surrounding the upcoming budget.

Does your family know how you intend to retire and leave an inheritance?

A wider disparity in families' knowledge regarding inheritance planning is revealed by research from Charles Stanley. According to their research, 27% of millennials and 36% of Gen Xers are not aware of their parents' inheritance plans.

It is concerning to learn that over a fifth (21 percent) of baby boomers do not have a will in place, which leaves their loved ones in the dark about how to handle their estate.

"What's evident from our research is that not everyone is aware of inheritance planning," stated Lisa Caplan, Charles Stanley's director of CSD advice and guidance. This creates the possibility that families will have to pay unforeseen or excessively high taxes, or even risk their ability to leave wealth to their loved ones.

Caplan also pointed out that, given the impending inclusion of pensions in the calculation, the number of families who must pay IHT on the estates of their loved ones will significantly increase due to the tax thresholds being frozen until 2030.

How to let your family know about your financial intentions.

Recent changes in tax laws must be taken into account when estate planning, which makes the situation more complicated than it has ever been.

To make sure your family is fully aware of your retirement planning, Razvi advises completing the following three steps.

1. . Regularly talking about retirement planning is crucial. Having regular conversations can help guarantee that everyone is aware of the plans and on the same page.

2. . Seek expert advice and support: To gain a better understanding of pensions and retirement planning, it's also critical to seek expert advice and support. To handle the complexities of retirement provision, this may entail speaking with professional advisers and pension providers.

3. Recognize contribution and income needs: It's important to think about how much should be put into the pension fund during one's working years and how to use the money that has been accumulated to support oneself in old age. In order to develop future financial resilience, you must comprehend your anticipated future financial needs and make wise choices.

Meanwhile, Gaita advises people to start talking to family members as soon as possible, incorporate flexibility into their financial planning in collaboration with a financial adviser, and stay informed about pension changes through reliable sources.

According to him, "open communication is one of the most effective tools families have, but money is still one of the last family taboos."

According to Caplan, having candid discussions about IHT planning with family members is another way to break taboo topics.

"Involve the next generation in the creation of your IHT strategies. Better plans and plans that function as intended after your death can result from this, she says. Find out what your family has planned and what they think. You can be taken aback. Try not to make snap decisions.

Caplan goes on to say that "it's not just about death" and suggests keeping an "open in the case of emergency" box with important papers like power of attorney and insurance policies, a list of your assets, and your will.

According to Caplan, "it's crucial that people have plans in place for how they will pass wealth on, understand the value of their estates, and, importantly, communicate this with their family."

In a different article, we examine how to get your estate ready for changes to the pension inheritance tax rules.