Inheritance tax changes could increase scam risk

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Upcoming changes to the inheritance tax (IHT) treatment of pensions are expected to reshape how clients think about wealth transfer. Alongside these planning considerations, there is a growing risk that heightened uncertainty could be exploited by pension scammers.

From April 2027, unused pension funds will fall within the scope of IHT. While this will not affect all clients, it is already influencing sentiment. Standard Life research shows that one in five (22%) individuals feel less confident in pensions as a result, while more than half (54%) are concerned about the potential tax burden on beneficiaries.

For advisers, this creates a dual challenge: helping clients navigate complex planning decisions while managing the increased risk of scams.

 

Uncertainty creating an opening for fraudsters

Periods of regulatory change often create the conditions scammers rely on most: uncertainty, urgency and incomplete understanding.

As clients review how their pension savings are structured and passed on, fraudsters may attempt to position themselves as offering timely or tax-efficient “solutions”. This can include claims that pension assets can be transferred into arrangements designed to avoid inheritance tax.

While such propositions may appear credible – particularly when aligned to genuine concerns – they can expose individuals to significant financial harm. The average pension scam is estimated to cost victims £47,000, with losses often irreversible.

This risk is not limited to higher-value clients. Even those unlikely to be directly impacted by IHT changes may be targeted, with scammers using a sense of urgency to accelerate decision-making.

 

Navigating complexity without increasing risk

For some clients, particularly those with larger pension pots, the IHT changes may prompt discussions around intergenerational planning, gifting or longer-term wealth strategies.

However, these are complex, highly individual decisions, and there is rarely a single or immediate solution. Where solutions are positioned as quick or straightforward, this should prompt caution.

A key risk arises when clients feel pressured to act before fully understanding the implications. In this context, adviser oversight is critical – not only in shaping the appropriate strategy, but also in slowing decision-making and providing reassurance.

 

The case for earlier intervention

By the time a transfer or withdrawal request reaches a provider, clients may already believe they are making a legitimate decision – making intervention significantly more difficult.

At the same time, scam tactics are becoming more sophisticated. Fraudsters are increasingly using detailed documentation, cloned websites and emerging technologies, such as artificial intelligence, to enhance credibility.

This highlights the importance of raising awareness early in the advice journey, rather than relying solely on point-of-transfer or withdrawal checks. Building client understanding of risks alongside planning conversations can help reduce the likelihood of issues emerging later.

 

Practical considerations for advisers

As client engagement around IHT and pensions increases, advisers may want to:

• Proactively address scam risk within planning conversations.
• Reinforce that legitimate solutions rarely require urgent action.
• Help clients understand the complexity of IHT and pensions, including potential taxation on death.
• Encourage verification of unsolicited approaches using trusted sources such as the FCA firm checker.
• Remain alert to behavioural signals, such as clients referencing external “solutions” or alternative arrangements.
• Report suspicious activity – to Report Fraud.

Embedding these considerations into advice discussions can support better outcomes and reduce client vulnerability.

 

A critical period ahead

The period leading up to April 2027 is likely to see increased client engagement with pension and tax planning.

While this presents an opportunity to add value, it also requires heightened vigilance. Clear communication, consistent messaging, and strong client understanding will be key.

By taking a proactive approach, advisers can help clients navigate change with greater confidence – while reducing their exposure to increasingly sophisticated pension scams.