Retired people are gifting more and spending more as concerns about Inheritance Tax (IHT) bills increase but are unclear about tax rules, a new study by Investec Save, which offers a range of cash savings products, shows.

The study found one in five retired adults expect to face an IHT bill when they or their partner die and are already taking action to try and minimise any future liabilities.

Government data shows they are right to worry – IHT receipts are forecast to be £9 billion in the 2025/26 tax year and are projected to rise to £14.5 billion by the 2030/31 tax year. The inclusion of unused defined contribution pension funds in estates from April 2027 is expected to result in additional or larger IHT bills for 152,700 estates by the 2029/30 tax year.

Investec Save’s research shows IHT concerns are having a major impact on retired people’s financial planning. Around a quarter (23%) say they are gifting more money now in order to reduce potential IHT bills, while 15% say they are spending more to reduce the value of their estate. Around one in 20 say they are actively spending the kids’ inheritance.

But the study reveals confusion about the tax rules. Nearly half (44%) say they gift what they want, when they want, while nearly one in three (31%) are unaware of the seven-year rule for potentially exempt transfers. Gifts may remain within the scope of IHT if the person making them dies within seven years, although exemptions and the total value of gifts will determine whether tax is due. Just one in 20 questioned say they keep details on gifts while more than half (54%) say tax laws do not dictate their gifting. More than two out of five (43%) are not aware of the annual £3,000 gift allowance while more than three out of four (78%) do not regularly review their will or financial plans in response to law changes.

The research shows most retired people are still being careful with their cash – 70% say their spending habits are based on their needs and not tax while 15% say they are actually spending less so they have money set aside in case they need to pay for care in later life.

David Hunt, Head of Savings, Investec Bank, said: “Concern about Inheritance Tax bills is changing how retired people manage their money with many gifting more and spending more than they would have otherwise in order to minimise potential bills in the future.

“The worry, however, is that there may not be enough planning in what people are doing, and they may risk issues in the future either by overspending or giving away too much money or by failing to keep up to date with tax rules. It makes sense to have money available in savings accounts in order to help ease any problems.”

For information on Investec Save products, visit: https://savings.investec.com/