Think carefully before withdrawing the tax-free cash element from your pension.
Taking the money and simply putting it into a low-interest savings account could suffer a double whammy of negligible returns and, by moving the money out of a tax-efficient pension wrapper, it will be assessed for inheritance tax as part of your estate.
With the inheritance tax nil rate band and residence nil rate band now frozen until 6 April 2026 at £325,000 and £175,000 respectively, an increasing number of people are finding they have a potential IHT liability.
Unnecessarily taking money from a pension increases the potential IHT burden further.
However, by leaving the pension intact, your money can be passed onto beneficiaries (including a non-domiciled spouse) free of UK IHT.
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