Nearly one in five active savers aged 65 or above have started gifting cash in response to the Government’s plans to include pensions in inheritance tax (IHT) calculations from April 2027.
Paragon Bank’s survey of 1,385 active savers revealed that 17% of those aged 65+ have begun gifting money specifically in response to the IHT changes, with 25% stating they have increased the amount they give.
Broken down by age groups: 19% of those aged 65–74 have started gifting, followed by 18% of those aged 85 and above, and 17% of 55–64-year-olds. Meanwhile, 29% of savers aged 75–84 and 85+ have increased their gifting levels.
The majority of gifts are directed towards immediate family, with 71% of respondents giving to children and 46% to grandchildren. Charitable donations (15%) outpaced gifts to friends (5%).
Four in ten savers who gift cash plan to give up to £3,000 this year, aligning with the UK’s annual tax-free gifting allowance. A further 19% intend to give between £3,000 and £10,000.
These behavioural shifts come in light of the Government’s reforms to IHT. From 6 April 2027, most unused pension funds and death benefits will be included in the value of an individual’s estate for IHT purposes.
Under current rules, individuals can gift up to £3,000 each tax year without it being added to the value of their estate, known as the annual exemption. Additionally, the 'seven-year rule' means that gifts made more than seven years before death are generally exempt from IHT. If the donor dies within seven years, taper relief may apply, reducing the tax owed depending on how long ago the gift was made.
Andrew Wright, head of savings at Paragon Bank, said: “Savers who are planning to give cash to loved ones should ensure their money is working hard for them in the meantime, earning a competitive rate of return. But it’s equally important to retain sufficient funds for their own future needs and gifting should be part of a balanced financial plan.”
