Why inheritance tax changes could heighten pension scam risk

Upcoming tax reforms may leave employees vulnerable, says Standard Life.

Upcoming changes to the inheritance tax (IHT) treatment of pensions could increase the risk of scams, as uncertainty prompts more people to revisit their retirement and estate planning decisions.

From April 2027, unused pension savings will fall within the scope of inheritance tax. While this will not affect everyone, early signs suggest it is already shaping behaviour. Standard Life research shows that 22% of individuals feel less confident in pensions as a result of the changes, with more than half (54%) concerned about the potential tax burden on their beneficiaries.

For employers and trustees, this creates a dual challenge: supporting members through complex decisions while helping protect them from increasingly sophisticated scams.

Uncertainty creating opportunity for fraudsters

Periods of change often create ideal conditions for scams. As individuals reconsider how to structure and pass on their pension savings, fraudsters are likely to position themselves as offering timely or tax-efficient “solutions”.

These may include claims that pension funds can be moved into alternative arrangements that avoid inheritance tax. While such propositions may sound credible, they can expose savers to significant financial harm. The average pension scam is estimated to cost victims £47,000, with losses often irreversible.

Even individuals who are unlikely to be affected by inheritance tax may be targeted, with scammers creating a false sense of urgency to encourage rushed decisions before people fully understand their options.

For those with larger pension pots, the changes may legitimately prompt conversations around wealth transfer, gifting or longer-term estate planning. However, these are complex decisions, and there is rarely a single or immediate solution.

Being pushed towards a “quick fix” – or making decisions under pressure – can increase the risk of both scams and poor financial outcomes. Taking time to understand options and seek appropriate guidance is essential.

The importance of early intervention

Scam tactics continue to evolve, with use of artificial intelligence and deep-fake technology making approaches appear increasingly convincing. As a result, by the time a suspicious transfer or withdrawal request reaches a provider, individuals may already have made their decision.

This highlights the importance of early and consistent engagement. Rather than relying solely on checks at the point of transfer or withdrawal, providers, employers and trustees have a key role to play in building awareness throughout the member journey.

Clear communication, proactive education and robust due diligence will all be critical in helping to reduce scam risk as these changes approach.

Key warning signs to share with employees

Employers can support their workforce by reinforcing awareness of common scam indicators, including:

Unexpected contact – unsolicited calls, emails or messages about pensions.
‘Too good to be true’ offers – promises of high or guaranteed returns.
Early access claims – offers to access pension savings before the minimum age.
Pressure tactics – urgency or time-limited offers designed to rush decisions.
False legitimacy – realistic-looking documentation, cloned websites or AI-generated impersonation.

Encouraging employees to pause and independently verify information using trusted sources like the Financial Conduct Authority’s firm checker can significantly reduce the risk of falling victim.

They can also stay informed about the latest scams using resources like ScamSmart, MoneyHelper, and the National Cyber Security Centre.

It’s also important to encourage employees to report all suspicious activity to Report Fraud.

A critical window ahead

As the April 2027 deadline approaches, questions around pensions, tax and estate planning are likely to increase. This makes the role of employers, trustees and providers even more important.

By helping individuals make informed decisions – and understand the warning signs of scams – the industry can play a vital role in maintaining trust and confidence in the pensions system at a time of significant change.