State pensioners facing 6-week payment delay as Rachel Reeves’ mini-Budget sparks panic

Savers are experiencing significant delays in accessing their pension funds following Chancellor Rachel Reeves’ decision to remove the inheritance tax (IHT) exemption on retirement savings starting in April 2027.

The move has sparked a rush among pensioners to withdraw their savings, with an estimated £7 billion being moved out of pensions to avoid the impending tax changes.

However, the surge in withdrawal requests has overwhelmed pension providers, leading to processing times that are now three times longer than usual. In some cases, savers have had to wait up to two months to access their funds.

The delays are attributed to outdated systems and “considerable bureaucracy” within pension providers, which struggle to handle the increased volume of requests.

Gabriel McKeown, head of macroeconomics at Sad Rabbit, noted that while there is typically a spike in withdrawal requests at the end of the tax year, the current situation is exacerbated by the looming changes to inheritance tax rules.

Wealth manager Daniel Hough of RBC Brewin Dolphin explained that many retirees are choosing to spend their savings now to reduce their potential inheritance tax liability, further driving the demand for withdrawals.

The Chancellor’s decision to include pensions in individuals’ estates for inheritance tax purposes has caused widespread concern among savers.

As a result, sales of annuities—financial products that convert pension savings into a guaranteed income—have surged by 20% in 2024, reaching £7 billion.

Annuities allow savers to cash in their pensions and avoid inheritance tax, as the funds are no longer invested and only income tax applies if the payout exceeds the personal tax-free allowance.

Pete Cowell, head of annuities at Standard Life, part of Phoenix Group, confirmed that the changes announced in the October Budget have led to a significant increase in people accessing their pensions early.

The delays and increased demand highlight the challenges faced by both savers and providers as they navigate the new tax landscape.

With the inheritance tax changes set to take effect in 2027, the pressure on pension providers is likely to continue, leaving many retirees frustrated as they seek to protect their hard-earned savings.