A significant change to Inheritance Tax (IHT) rules is on the horizon. Currently, pensions are widely used as a tax-efficient way to accumulate and pass on wealth. However, with unused pension funds falling within the scope of IHT from April 2027, many people could see a higher proportion of their estate subject to IHT. This is prompting many to reassess their current estate planning strategies, particularly those with larger pension pots.
With research7 highlighting over half (57%) of clients are unaware of the imminent change, now is the perfect time to tune in. These changes could increase the taxable value of estates, meaning loved ones may ultimately face higher IHT liabilities on pension savings.
What’s right for you
There are ways to re-position your plans, which of course will be heavily dependent on your own circumstances and objectives.
Over half (55%) of advisers are suggesting lifetime gifting strategies, while 49% are encouraging clients to consider earlier drawdown of pension assets. Just over half (51%) are also reviewing retirement income needs and long-term spending assumptions to ensure plans remain sustainable under the new rules. Other strategies being discussed include the use of tax-efficient wrappers such as ISAs (32%). Another option includes considering life insurance to help offset any potential future tax bills.
Time to talk
What’s clear is that the changes are seen by many as a catalyst for earlier and more meaningful intergenerational wealth conversations.
With the right planning, it’s possible to reduce the impact on your estate. Now is the time to review your estate planning strategy and ensure it aligns with your long-term financial and family goals. We can help you explore your options and make plans that work for you and your family.
The changes from April 2027 are proposed and subject to legislation.
7Scottish Widows 2026
Trust planning can be complex and may trigger tax charges depending on individual circumstances. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority does not regulate Will writing, tax and trust advice and certain forms of estate planning. Tax legislation and rates can change, and their application depends on individual circumstances.