Retirement and IHT reforms:
The retirement landscape is undergoing rapid change with new inheritance tax and pension rules impacting established strategies. From April 2026, inheritance tax reliefs are set to tighten, with less IHT relief for AIM shares and a new allowance on unquoted Business Relief. In addition, unused pension funds and death benefits will be brought into the scope of inheritance tax from 6 April 2027.
The fundamentals of IHT and Business Relief
Triple Point's Diana French discusses the evolving IHT landscape and the tools and strategies advisers need to help their clients be ready
Read article
in association with
The 2015 pension freedom reforms transformed the UK retirement landscape, empowering individuals to tailor retirement income strategies to personal needs. However, the reforms also introduced complexities and risk
Building an innovative, collaborative solution for UK retirement
Back to top
Rethinking wealth and adapting to changing regulations
Meanwhile, broader retirement reforms covering pension transparency, fund performance, and tax policies are also reshaping the advice environment. How can advisers balance compliance and clarity with helping clients to maintain secure, flexible retirement outcomes? Our experts offer their insights and views below.
Xxxxxx xxxx
Bringing pensions into the scope of IHT – the biggest advice “risk” in years
The threat of market downturns early in retirement can damage retirement income by reducing future portfolio growth potential. One key to managing sequencing risk is implementing an income strategy that seeks to limit portfolio withdrawals when market returns are poor
Beyond sequencing risk: Dynamic withdrawals for retirement
Nick Bird, Regional Director, Triple Point discusses the benefits of Business Relief when it comes to estate planning
Three talking points for client conversations about life and legacy
Quilter lists five practical steps for advisers to consider ahead of new changes in 2027.
Preparing for pensions coming into scope for IHT
Return to homepage
Triple Point's Diana French discusses the evolving IHT landscape and the tools and strategies advisers need to help their clients be ready.
Inheritance Tax (IHT) is no longer paid only by the very wealthiest estates. The Office for Budget Responsibility (OBR) expects IHT receipts to reach a record £8.4 billion in the 2024/25 tax year, before climbing to £9.1 billion in 2025-26, and rising to a staggering £14.3 billion by 2029/30.1 Against this backdrop of more families facing an IHT liability, the fundamentals matter more than ever. Understanding the allowances, the thresholds and the upcoming changes gives you the foundation for more meaningful conversations about protection, succession and long-term planning.
When discussing IHT with clients, it is essential to start with the core allowances and explain them in a way that feels straightforward. The nil-rate band is the simplest place to begin. Every individual has an IHT allowance of £325,000, and anything above that threshold is normally taxed at 40%. The residence nil-rate band requires more careful explanation. Many clients assume it applies automatically, yet it has several conditions. It can only be used against a main residence, the beneficiaries must be direct descendants, and the estate must be valued below £2 million for the relief to apply in full. Once the estate passes that point, the allowance tapers in the same way the personal allowance tapers for income tax. Explaining these limitations can make a significant difference to a client’s understanding of their overall position.
A recurring theme in IHT conversations is that the three most widely used IHT strategies – gift it, trust it, or insure it – all have their own drawbacks, particularly around timing, access and loss of control over the assets
Diana French, CCO – Retail Distribution
Setting out these allowances and changes in a clear, structured way can help clients understand why IHT planning is increasingly important
Last year’s Budget introduced changes that advisers must weave into client conversations. From April 2026, every individual has a £2.5 million allowance that can be used against qualifying unquoted Business Relief and Agricultural Property Relief assets2. Amounts above that will still attract relief, but at 50%. From April 2027, unspent pensions will come within the scope of IHT. This is the most substantial shift, as pensions have long been viewed as one of the most IHT-efficient elements of a client’s portfolio. Setting out these allowances and changes in a clear, structured way can help clients understand why IHT planning is increasingly important. It also creates the foundation for discussing the wider range of strategies available to them, including Business Relief, which has become more relevant as the landscape continues to evolve.
A recurring theme in IHT conversations is that the three most widely used IHT strategies – gift it, trust it, or insure it – all have their own drawbacks, particularly around timing, access and loss of control over the assets. Gifting is the most obvious example. While it can be effective, the seven-year wait before a gift becomes fully IHT-exempt is a significant barrier for clients who are uncertain about their long-term needs. The loss of access to their wealth can be more difficult still. Clients may be thinking about future care costs, helping children or grandchildren, or simply maintaining financial independence. For many, giving money away outright does not sit comfortably. The same concerns arise with discretionary trusts. Although they can offer structure and control on the beneficiary side, they also have a seven-year clock and require clients to part with capital potentially needed later. And what about taking out insurance to cover an IHT liability? Well, even whole-of-life insurance, useful in some scenarios, brings its own constraints. Premiums can be prohibitively expensive, underwriting can be slow or complex, and many clients are simply too old to take out suitable cover. So, what’s left? Let’s return to Business Relief.
Explaining IHT allowances and upcoming rule changes
In a sentence, Business Relief is a two-year IHT solution where the capital remains with the client should they ever need it. Provided the shares qualify and have been held for at least two of the last five years, and are held at death, the estate can claim the relief on the amount invested, so 100% relief on the first £2.5 million invested (and 50% thereafter), or 50% relief across the board for AIM-listed shares. Speed, access and control are a big part of the appeal. Compared with the seven-year horizon for gifts or trusts, the psychological difference of a two-year timeframe is considerable, especially for clients where time is of the essence. Business Relief also keeps client capital within reach during their lifetime, particularly important for those worried about future care costs, who support family members or need to maintain financial flexibility in retirement. The inter-spousal transfer rules strengthen this further. If one spouse dies before the two-year qualifying period has passed, the surviving spouse only needs to hold the investment for the remaining time to reach the threshold. That continuity can be reassuring for couples looking to plan together.
The IHT landscape is evolving, and advisers and paraplanners need to help their clients be ready. Business Relief is one of the few estate planning strategies offering meaningful IHT mitigation alongside access, a short qualifying period and the ability to plan across a couple’s combined allowances. This makes it a sensible and straightforward component of a well-structured and future-facing estate plan.
The 2024 Autumn Budget
How Business Relief works, who it can help and why access matters
Now is a good time for estate planning conversations
Why many traditional IHT tools fall short for clients
Business Relief is a two-year IHT solution where the capital remains with the client should they ever need it
Diana French CCO – Retail Distribution, Triple Point
Important information Investor’s capital is at risk. Tax treatment depends on the individual circumstances of the investor and is subject to change. This financial promotion has been issued by Triple Point Administration LLP which is authorised and regulated by the Financial Conduct Authority no. 618187.
Retirement and IHT reforms: Rethinking wealth and adapting to changing regulations
Sources 1. Source: OBR, May 2025 2. The government announced an amendment to the initial proposed allowance of £1 million in December 2025.
Nick Bird, Regional Director, Triple Point discusses the benefits of Business Relief when it comes to estate planning.
Without question, inheritance tax (IHT) represents a huge threat to how most of your clients’ wealth is passed down through to their loved ones. It could also be a huge threat to your business, in terms of your assets under management. But as with most things in life, the threat is also an opportunity. It gives advisers the chance to be truly proactive in this area, by repositioning estate planning to clients in a positive and, dare I say it, joyful way.
Perhaps the problem is we usually talk about death in hushed tones. The Romans had a healthier approach, captured in the phrase memento mori, or “remember you will die”. It sounds like a warning, but is a reminder that life is finite, so our legacy matters. If we bring that mindset into estate planning, the conversation becomes far more constructive. It becomes about living well, making meaningful choices and leaving something we can feel proud of, rather than dwelling on death and tax.
Xxxx xxxxxxxx xxxxxxxxxx xxxxxxxxx xxxxxxxx xxxxx xxxxxx xxxxxxx xxxxxx xxxx
The real shift in engagement comes when the discussion turns to the next generation
Making clients aware of the need for estate planning is one thing – making them care is another. Encouraging them to draw their family tree can help open up the conversation. Once clients acknowledge that wealth may pass down from parents or parents-in-law with estates worth more than the IHT threshold, it can become easier to introduce the idea that, without careful planning, HMRC becomes an uninvited member of their family tree. The contrast between money going to loved ones or to the Treasury usually prompts clients to think differently. The real shift in engagement comes when the discussion turns to the next generation. Many clients recognise that their children may rely on that inheritance for major life steps such as buying a home. It also helps them picture the practical impact of legacy in a way that feels far more natural. Exploring the family tree in this way consistently widens the adviser’s opportunity set. It helps clients see estate planning as an act of helping: themselves, their parents and their children. There is no sense of greed, only a focus on achieving the right outcomes for the people who matter to them.
Once clients see the value of engaging with estate planning, the next step is to show them the wider set of options. Good planning is rarely a single action. It often feels more like a jigsaw. Spending is usually the first piece, because so many clients have saved carefully for years and need permission to enjoy the money they have worked so hard to build. Gifting is really just an extension of spending. If clients do not need the money and are unlikely to spend it, they can pass it on now and see the joy their gift creates. At Triple Point, we use Business Relief to complete the jigsaw, either as a large or small piece of the puzzle, depending on client needs. It can fit neatly into a plan for clients who want to retain control of their assets while still reducing a potential IHT bill. The simplicity and the speed of Business Relief are often what resonate. There is a huge psychological difference between the two-year qualifying period for Business Relief and the seven-year wait for gifts or trusts to become fully IHT-exempt. Two birthdays feel much more manageable for clients than seven.
A legacy is something to be proud of
The real power of Business Relief is that it is life-changing planning that does not change the client’s life. It keeps the money accessible should clients ever need it, and also moves it out of the IHT calculation if they do not, subject to the usual allowances. For example, £500,000 placed in a qualifying Business Relief investment could reduce or eliminate a significant IHT bill for loved ones, yet the client’s personal wealth calculation looks largely the same before and after having made the investment. Of course, the higher risk involved with investing in Business Relief-qualifying investments should be clearly flagged by advisers and understood by clients. But doing nothing carries its own risk. Many people become paralysed when they think about the different options, and that can leave them exposed to an inevitable IHT bill on their estate. Business Relief offers a way through that paralysis. It gives clients the comfort of retaining access, the reassurance of a shorter timeframe to IHT exemption, and the opportunity to achieve the legacy they want without being forced into spending or gifting decisions they perhaps do not feel ready to make. So, the next time you sit down for an estate planning conversation, try these simple entry points: memento mori helps clients to focus on their life and legacy, the family tree helps them to consider who matters most, and the jigsaw helps them view spending, gifting, trusts and Business Relief as one complete picture. Hold on to those and the conversation becomes simpler, more positive and far more appealing for clients.
The family tree bears fruit
Business Relief offers flexible control
Completing the estate planning jigsaw
Good planning is rarely a single action. It often feels more like a jigsaw.
Nick Bird, Regional Director
1. Source: OBR, May 2025
Nick Bird Regional Director, Triple Point
The 2015 pension freedom reforms transformed the UK retirement landscape, empowering individuals to tailor retirement income strategies to personal needs. However, the reforms also introduced complexities and risk.
Our innovative UK retirement solution is designed to address the unique challenges and complexities of retirement planning during the decumulation phase. It combines a multi‑asset portfolio designed to offer income, growth, and flexibility alongside the option of an annuity (or annuities) to deliver secured lifetime income. Our approach aims to address the complexities of retirement planning during the decumulation phase. We believe some changes introduced in the latest Budget will make our flexible and innovative framework more relevant and timelier.
The accumulation and decumulation phases in retirement signify two distinct stages in an individual’s financial life cycle. During accumulation, individuals work, earn income, and invest to enhance their retirement savings, typically spanning several decades. The primary focus is on maximising contributions to savings and investment vehicles, such as employer‑sponsored pension schemes, while benefiting from the time value of money and compound interest. In contrast, decumulation begins when individuals retire and withdraw from their accumulated savings to cover living expenses. This phase presents unique challenges, including the sequence of returns risk, which involves financial vulnerability due to the order and timing of returns during the withdrawal period. Negative market returns early in retirement can compel retirees to sell assets at a loss to meet their expenditure needs, potentially leading to a more rapid depletion of funds than anticipated. Additionally, the uncertain time horizon during the decumulation phase introduces longevity risk—the possibility of outliving one’s savings.
Effective retirement planning should be a lifelong endeavor, allowing individuals to enjoy a secure financial future without outliving their savings
xxxxxxxxxxx xxxxxxx
Drawdown has become the most popular pension product post‑pension freedom reforms, allowing individuals from age 55 to withdraw funds from their pension savings flexibly
From accumulation to decumulation
Sources 1. Hymans Robertson (March 2024), ‘Reflections on the 10th anniversary of pension freedoms announcement.’ 2. Financial Conduct Authority (FCA), ‘Retirement income market data 2023/24.’ 3. This is set to change to 57 on 6 April 2028.
IMPORTANT information This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction. Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price. The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction. 202411-4037695
Yoram Lustig, CFA Head, Global Investment Solutions, EMEA, T. Rowe Price
Eva Wu, CFA Associate Solutions Strategist, T. Rowe Price
(Fig. 1) Transformation of the UK retirement savings landscape
Key differences between these phases lie in their objectives and financial flexibility. In accumulation, individuals can control contributions and capitalise on market growth. In decumulation, they must manage withdrawals strategically while mitigating risks associated with market volatility and longevity. Effective retirement planning should be a lifelong endeavor, allowing individuals to enjoy a secure financial future without outliving their savings.
Are pensions freer post‑pension freedom reforms?
The 2015 pension freedom reforms fundamentally transformed the retirement savings landscape in the UK, enabling individuals over 55 to access their defined contribution (DC) pension pots with unprecedented flexibility. Before these reforms, over 90% of retirees opted for an annuity, which provided a guaranteed income for life but was often viewed as rigid, opaque, and expensive. Post‑reforms, retirees have three primary options for accessing their savings: (1) cash lump sum, (2) flexi‑access drawdown, and (3) annuity. Pension freedom reforms aimed to empower individuals to tailor their retirement income strategies to personal needs and market conditions. But they also introduced complexities and risks, such as rapid depletion of funds if not managed wisely, financial anxiety, and poor decision‑making due to inadequate support and guidance.1 Drawdown has become the most popular pension product post‑pension freedom reforms,2 allowing individuals from age 553 to withdraw funds from their pension savings flexibly. This enables individuals to take as much, or as little, income as needed while keeping the remaining funds invested for potential growth. Up to 25% of the pension pot can be accessed tax‑free, with withdrawals outside of that subject to income tax. This arrangement contrasts with annuities, offering retirees greater control over their income and investment strategies.
However, drawdown carries risks such as early depletion due to market downturns and/or imprudent withdrawals. Increased control and flexibility mean individuals bear more responsibility for making complex financial decisions. Tailored post‑retirement advice can mitigate these risks and ensure long‑term economic stability. Since introducing pension freedom reforms, individuals have changed how they manage and withdraw retirement savings. However, whilst most retirement solutions remained suitable for accumulation, they often overlooked the distinct challenges of decumulation. This emphasis on accumulation over decumulation has resulted in many retirement products inadequately supporting individuals in navigating post‑retirement complexities. At the same time, many retirees lack sufficient guidance to manage their withdrawals and investments during this phase effectively. Consequently, while pension freedom reforms have empowered individuals to access their savings, a need remains for suitable, personalised decumulation solutions, balancing financial security and income sources throughout retirement.
To learn more about:
The 5D framework: Balancing trade‑offs in decumulation The fall and rise of annuities A hybrid retirement solution Personalisation through partnership with financial advisors Three distinct versions of out retirement solution Diversification in decumulation Our expertise as a global asset manager
Click here to read the rest of the article.
2015 Pension Freedom reforms
1. Cash lump sum
2. Flexi-access drawdown
3. Annuity
The threat of market downturns early in retirement can damage retirement income by reducing future portfolio growth potential. One key to managing sequencing risk is implementing an income strategy that seeks to limit portfolio withdrawals when market returns are poor.
One of the most pertinent investment risks that retirees face is sequencing risk—the danger that poor market conditions early in retirement will deplete their wealth at a faster‑than‑expected rate as low or negative returns coincide with portfolio withdrawals. The negative impact of sequencing risk—also known as sequence‑of‑returns risk—on retirement outcomes can extend far beyond the shorter‑term volatility associated with events such as the COVID‑19 pandemic or the more recent tariff‑related market sell-off. By forcing recent retirees to sell more assets to meet their immediate income needs, poor returns caused by market downturns may reduce the capital available for future portfolio growth during potential market rebounds. The result can be a permanent reduction in the portfolio’s ability to generate retirement income. In contrast, market downturns later in retirement typically are less damaging, as the portfolio already has supported withdrawals over time. We believe that managing sequencing risk effectively requires a nuanced approach that balances income needs with capital preservation. This involves more than just careful portfolio construction and ongoing asset allocation management; it also requires a thoughtful withdrawal strategy that considers the investor’s financial circumstances and tolerance for risk.
Figure 1 illustrates the significant effect that sequencing risk can have on retirement outcomes. The charts compare the patterns of annual returns experienced by two hypothetical retirees and how those patterns could affect their portfolio balances over time. Each hypothetical investor starts with a GBP 100,000 portfolio and withdraws GBP 7,000 annually. While the hypothetical annual returns are equivalent for both investors, the sequence of those returns differs dramatically in the first 10 years. As a result, while both hypothetical investors experience portfolio declines, the effect on their respective portfolio balances is very different. The hypothetical investor who faced a significant market downturn early in retirement depleted their savings much faster than the investor who encountered a comparable decline later.
Sequencing risk can significantly impact outcomes
Source. 1. William P. Bengen. (October 1994). ‘Determining withdrawal rates using historical data,’ Journal of Financial Planning, Vol. 7, Issue 4.
Berg Cui Senior Quantitative Investment Analyst, T. Rowe Price
Annual returns matter, but the sequence can matter more
Three strategies are widely used in the UK to mitigate sequencing risk. These are generally known as the cash buffer, bucketing, and dynamic withdrawal approaches. Cash buffer. By maintaining a significant cash reserve (typically equal to two to three years of expenses) to weather market downturns, retirees may be able to avoid selling assets when prices are temporarily depressed. However, one drawback of this approach is that large cash reserves may lead to slower portfolio growth, as long‑term returns for cash may not be as high as for other investments. Bucketing (also known as horizon planning). By allocating funds into low‑risk investments for short‑term needs and higher‑risk investments for longer‑term needs, investors can adjust the sources of their withdrawals based on market conditions. A potential drawback is the complexity of managing multiple investment buckets, which may require frequent monitoring and adjustments. Dynamic withdrawal. In this approach, investors make larger withdrawals from their portfolios when market conditions are good and smaller ones in bad years. A key benefit of this approach is that the balance trajectory can be managed to keep it from drifting too high or too low because of the withdrawal adjustments. The downside of this approach is that income fluctuates and becomes less predictable. Under both the cash buffer and bucketing approaches, retirees withdraw a fixed amount each year to cover living expenses. This can provide stability and predictability and offer greater confidence in meeting income needs. By contrast, the stability and predictability of income under the dynamic withdrawal approach will depend heavily on how the withdrawal strategy is designed. This creates complexity and typically requires careful research and expert guidance to succeed. One simplified version of dynamic withdrawal is the “4% rule” proposed by U.S. financial planner William Bengen as a rule of thumb for determining how much a retiree should withdraw from a retirement account each year. Retirees using this rule set their withdrawals to equal 4% of the value of their portfolios and then maintain that same percentage—rather than a fixed amount—going forward1. Some financial advisers in the UK have adopted this guideline. Other methods exist to mitigate sequencing risk, such as phased retirement, in which investors gradually transition into retirement by reducing work to manage the income pressure on their portfolios. However, phased retirement is, in essence, a personal choice and can be combined with the strategies outlined above.
Read more
Discover why a dynamic withdrawal strategy could allow retirees to manage their savings more confidently.
(Fig. 1) Hypothetical portfolio returns and balances over a 15-year retirement window.
Figures refer to simulated past performance and that past performance is not a reliable indicator of future performance. For illustrative purposes only. Equity returns for the hypothetical portfolios in our analysis were represented by the MSCI All Country World Index (ACWI) measured in GBP. Bond returns were represented by the Bloomberg Global Aggregate Bond Index hedged to GBP. For cash, we used the 3-month Sterling London Interbank Offered Rate (Libor) until 2023 and the 3-month Sterling Overnight Index Average (SONIA) rate for 2024. *Annual returns shown are purely hypothetical and not based on the historical market performance of any asset class. All figures calculated in GBP. Data analysis by T. Rowe Price.
Common strategies for managing sequencing risk
We believe that by understanding and planning for sequencing risk, investors can better protect their retirement savings from the potentially devastating effects of poor market returns early in retirement. Investors and/or their financial advisors should review this approach regularly.
*
Back to Home
1
2
3
4
5
6
7
8
9
10
NEXT >
< PREV
1/2
Building flexible retirement in uncertain times
Xxxxx xxxxxxxxx xxxxxxxxxxxxxx
Ever since the announcement on 30 October 2024 that pensions will fall into scope for inheritance tax (IHT) from 6 April 2027, I’ve spent most of my professional life locked in a room trying to unpick what this means for advisers and their clients — and how we help families avoid sleepwalking into punitive tax traps. Following countless calculations and modelling that would make your head spin, the conclusion becomes impossible to ignore: the change coming in April 2027 presents the biggest advice risk we’ve seen in a generation. Why risk? Because doing nothing here doesn’t mean families won’t be any worse off. They will. Action is needed and thinking has to start now. So, let’s turn this risk into an opportunity. This isn’t just a tax shift. It’s a moment that will reshape how clients think about money and how advisers demonstrate the value that only they can bring.
On our Q4 national roadshow we saw around 1,000 advisers, from Aberdeen to Bournemouth, and the feedback was striking*. 95% of advisers told us they’re concerned about the IHT changes to pensions (and the double taxation impact of those aged over 75). They also expect two‑thirds of their clients to be impacted and require IHT advice. That’s an extraordinary level of exposure across all client banks. This isn’t just a high-net-worth problem. Many Baby Boomers and Gen X clients now fall into the new danger zone without realising it. A combination of frozen IHT allowances, rising property values, defined benefit transfers from a decade ago, ISA growth and strong market performance means plenty of ordinary clients who would never ever have dreamt of having an IHT problem are now sitting on estates that will fall into the IHT spotlight from 2027.
The scale is huge
Source. *Quilter research, 774 advisers, Q4 2025
Roddy Munro, Head of Technical Sales, Quilter
The harshest part of this policy is the “double tax” effect. If a client dies after age 75 (which life expectancy data tells us most will) beneficiaries face: IHT on the value of the pension now sitting inside the estate Income tax on pension death benefit The sums become enormous when you model them. And most affluent clients don’t help themselves: they don’t spend enough, and they don’t gift enough. They accumulate assets at levels they will simply never use. This has to change or the tax man wins.
Significant opportunity to demonstrate your value
With our new pension crystallisation tool you can model your crystallisation strategies and see how much you can boost your client’s legacy by – making it clear to see the value you add. Get in touch with your usual Quilter consultant now to gain access to the tool or for any other support. You can also access Quilter’s dedicated webpage for supporting information, including a handy pension IHT readiness guide. www.quilter.com/rewrapping
The double‑tax danger
95% of advisers are concerned about IHT changes to pensions (and the double taxation impact of those aged over 75). Two-thirds of clients are expected to be impacted and require IHT advice
Human behaviour can be a real challenge. Clients who have spent 40 years saving, simply cannot bring themselves to spend. Others refuse to gift because “they might need it one day”. This is where the adviser/coach role becomes essential. You’re not just running cashflow models; you’re helping clients reframe what money is for. You’re giving them permission to enjoy life or to support their families today, not in a tax‑inefficient lump after death.
Behaviour matters just as much as maths
We now need to rethink long‑standing decumulation strategies. The traditional approach of preserving the pension until last will, from April 2027, risk leaving families with even higher tax bills. Instead, advisers may need to: prioritise drawing from pensions far earlier, use pension tax‑free cash sooner and consider removing tax free cash from the client’s estate rewrap other IHT exposed assets into structures such as onshore bonds within trusts to move value outside the estate over time. This shift demands more careful balancing of lifetime and legacy taxes, and deeper conversations with clients about how best to protect their wealth for the future.
Reverse decades of decumulation thinking
Where advisers can shine
For the first time in more than a decade, advisers have a natural catalyst for deeper client engagement. Clients are going to need help with: reframing their relationship with money understanding why preserving the pension may now be the least tax‑efficient option drawing confidently on pension assets earlier using investment bonds and trusts appropriately navigating the emotional side of spending and gifting managing wealth across families, not just individuals understanding the “double tax” danger after age 75 Crucially, advisers can help clients make decisions they would never make alone — because behaviourally, most people are hard‑wired to do the opposite of what is now optimal. That’s exactly why they need your advice, and exactly why this moment matters. Your business depends on it too. Handled well, this could be the biggest advice opportunity we’ve seen in years — born from complexity, behaviour, and the need for expert guidance. Let’s turn this risk into an opportunity – start planning now.
You’re giving clients permission to enjoy life or to support their families today
The changes coming into effect from April 2027 represent one of the biggest shifts in retirement and estate planning in over a decade. They will require advisers to rethink long‑established strategies and ensure clients are positioned for the best outcomes. Failing to adapt could mean a significant share of client wealth ultimately passing to the state. Our adviser research* shows that 93% of advisers are focusing on preparing for the for pension IHT changes, with advisers expecting around two‑thirds of their clients to be affected. This is not a niche tax adjustment — it’s a major shift that demands early, proactive planning.
Effective IHT planning relies on accurate, up‑to‑date client information. Advisers need clear sight of clients’ total wealth, family structures, income requirements, and current estate plans. A comprehensive view can help you identify gaps and anticipate each client’s future needs so you can tailor suitable solutions.
Below are the top five steps advisers can take now.
Forward‑looking analysis is essential when legislation changes – but can often be tricky to calculate. Quilter’s Pension Crystallisation Tool allows you to project client positions, test crystallisation strategies, and quantify the value of your advice. Being able to clearly visualise different planning scenarios lets you explore and communicate the potential outcomes of various strategies with greater clarity. As well as making complex calculations easy, this can help you guide client discussions and address any concerns so that decisions can be made early.
For deeper guidance, download Quilter’s Pension IHT Guide or speak to your usual Quilter consultant.
3. Use modelling tools to demonstrate the impact of IHT
Being able to clearly visualise different planning scenarios lets you explore and communicate the potential outcomes of various strategies with greater clarity
For the last decade, the typical drawdown approach has been to take money from ISAs and GIAs first and preserve the pension pot. From April 2027, this may no longer be the most efficient route for many clients. Advisers will need to reassess and adapt their strategies. Examples include: Move PCLS outside the estate For clients who don’t need to access their pension commencement lump sum (PCLS), consider gifting it into an IHT‑efficient trust to reduce the taxable estate. Activate pension income Unused pension funds may face double taxation (IHT and income tax) on death after age 75. Taking regular withdrawals can help manage your client’s tax exposure. Spend, gift, or insure Clients may choose to spend or gift wealth to loved ones, making use of exemptions such as gifts out of normal income. Where affordable, whole of life insurance may be suitable for covering IHT liabilities. Trust planning Gifting into an IHT-efficient trust can move assets outside the estate after seven years. Flexible trusts, such as Quilter’s Lifestyle Trust, allow clients to access capital at fixed points in the future if needed, giving them confidence to start their IHT planning now – even if they are unsure of their future financial needs.
4. Redefine advice strategies for high‑priority clients
Our research* shows that one in four advisers intend to review their current platform, with the evolving tax environment prompting them to reassess the tools and features required to deliver financial advice. The features advisers considered crucial from their platform were: Flexible and reliable pension income (83% of advisers) Efficient movement between wrappers (78% of advisers) Integrated onshore bond (72% of advisers) A wide range of post-issue trusts (72% of advisers) Quilter stands out as a true financial planning platform, offering the reliable features, integrated solutions, and adaptability needed to support you and your clients through these significant changes. Find out more by downloading Quilter’s platform brochure here.
5. Platform assessment
Start planning now
This is arguably the most significant systemic shift in advice for decades. Acting too late could leave many families facing unnecessary tax bills. But by taking proactive steps now, and having clear, sometimes challenging conversations, you can help protect clients and demonstrate the real value of your expert financial planning.
By modelling inflation, asset growth, and life expectancy, you can identify clients who are likely to move into the IHT danger zone over time
1. Strengthen the quality of your client data
The quickest way to get ahead is to identify those clients most exposed to IHT. Even clients who do not consider themselves wealthy may fall into the IHT danger zone due to frozen allowances, pension values, ISA holdings, and rising property values. Segmentation can help you pinpoint where conversations should start. Prioritise by age and planning status Focus on older clients or those who haven’t yet established an estate plan. These individuals risk missing out on valuable allowances and facing unexpected tax bills. Intervening early can give you a wider range of planning options. Beware the loss of the RNRB Clients who are eligible to use the residence nil‑rate band (RNRB), but have estates over £2 million, may lose some or all of this allowance. If a married couple lose their RNRB (2 x £175,000), their loved ones could suffer an additional £140,000 in IHT. Using the right planning strategies, you may be able to preserve or reinstate this allowance. Project forward, not just today’s position By modelling inflation, asset growth, and life expectancy, you can identify clients who are likely to move into the IHT danger zone over time. Addressing these future risks in advance can help prevent clients’ families facing an unexpected IHT bill.
2. Analyse, segment, and prioritise clients
How Replacement Business Relief helped preserve a £2 million legacy
A Liverpool family’s business sale shows how quickly Business Relief can be lost – and how timely planning can protect a legacy.
Once unspent pensions are brought into people’s taxable estates from April 2027, more clients than ever will risk leaving behind an IHT liability for their loved ones. IHT receipts are expected to jump from £9 billion in the current financial year to over £14.5 billion by 20311. The onus now is very much on financial advisers to encourage their clients to revise their thinking and consider how they plan for IHT. Otherwise, the biggest beneficiary of your client's wills may potentially be the HMRC, rather than the people they care most about.
Advisers need to urgently remind their clients that in many cases, IHT can be mitigated – and legacies protected – with proactive estate planning. But time is often a critical factor, and in many cases doing nothing can undo years of hard work and saving. I recently helped a lovely couple in Liverpool that had built a successful family business over many years, entirely from the ground up. They decided to sell after one of them received a terminal diagnosis. It’s not uncommon for family businesses like this to qualify for Business Relief; it’s what it was intended for. Their business was valued at £2 million, and qualified in full. However, after they sold the business, the sale triggered an IHT liability, as the £2 million was no longer held in Business Relief-qualifying asset, but as cash in their bank account. Because their nil-rate bands were being used elsewhere, the entire £2 million would have been taxed at 40%, resulting in an IHT bill of £800,000. This would have taken a substantial chunk out of the value of the business the couple had worked so hard to build as a legacy for their children. Fortunately, the couple’s financial adviser was aware of the opportunity to replace the Business Relief qualification they had just lost, and was able to give them the right advice at just the right time.
When it comes to IHT and estate planning, time is a critical factor
In order for shares to qualify for Business Relief, they must have been held for a total period of two out of the last five years and be held on death. The rules mean that if you sell an asset that was qualifying for Business Relief and reinvest the proceeds into another qualifying asset, you do not have to restart the normal two-year holding period. Where the original business had been held for more than two years, and provided the reinvestment is made into another BR-qualifying business, the two-year holding period does not restart. In this case, the couple reinvested the sale proceeds in the Triple Point Estate Planning Service, which invests in unquoted companies expected to qualify for Business Relief. Because the couple had held their Business Relief-qualifying business shares for decades, as soon as the £2 million was reinvested, the full value was immediately outside of their taxable estate. Sadly, just a few months after that money was invested, the investor passed away. But thanks to the timely actions of their financial adviser, an IHT bill of £800,000 on the sale of the business was prevented. Being able to preserve the value of the business, which that couple had devoted so much of their lives to building, was a fitting legacy. So, this real-life example underlines an important point. When it comes to IHT and estate planning, time is a critical factor. Better to encourage clients to act decisively when they can, rather than share the family’s regret later.
Counting the cost of inaction
The new rules being introduced from April 2027, which will bring unspent pensions into everyone’s taxable estate, mean that now more than ever, estate planning is a family conversation. Advisors who can integrate estate planning and succession planning holistically within their business, and view it as a core pillar of their advice, can use it to build very resilient, multi-generational businesses. The rule changes may have made estate planning complex, but advisers have the tools at their disposal to offer straightforward solutions that deliver the best possible outcomes for clients. Often, the most valuable step is to start the conversation early.
Replacing lost Business Relief
Conversations that can help grow your advisory business
Important information The Triple Point Estate Planning Service places capital at risk. Tax treatment depends on the individual circumstances of the investor and is subject to change. Tax relief depends on the companies we invest in maintaining their qualifying status. This financial promotion has been issued by Triple Point Administration LLP which is authorised and regulated by the Financial Conduct Authority no. 618187.
Lucy Dolan, Senior Business Development Manager
Better to encourage clients to act decisively when they can, rather than share the family’s regret later
Source 1. obr.uk/forecasts-in-depth
Inheritance tax and pensions: the cost of doing nothing
With unspent pensions due to fall into IHT from April 2027, advisers face an urgent need to shift client strategies—or families could pay a far higher price for delay.
The announcement in the October 2024 Budget, that unspent pensions would fall into the scope for Inheritance Tax (IHT) from April 2027, cast a long shadow over estate planning and made life even more difficult for financial advisers. Bringing unspent pensions into taxable estates is expected to contribute towards boosting IHT receipts from an estimated £9 billion in the current tax year to more than £14.5 billion by 20311. In other words, a significant number of clients either need to arrange alternative estate planning strategies, or risk leaving significant IHT bills for their families to pay. Last year I had a coffee with a financial adviser who said he felt a real sense of guilt after hearing about the pension proposals. His father had founded their advice firm, and for a long time they had been advising clients to leave their pension untouched for as long as possible, so it could be passed IHT-free to the people they cared most about. But from April 2027, that tried and tested drawdown strategy is no longer suitable. But as I told that financial adviser, there is still time to make proactive steps towards successful estate planning. We can't change the rules around IHT, but we can make sure clients do something about their estate while they still can.
From April 2027, that tried and tested drawdown strategy is no longer suitable
The Autumn Budget 2024 made another unexpected announcement related to IHT and estate planning, with the introduction of a new £1 million allowance for both unquoted Business Relief and Agricultural Property Relief. Under the proposals, the first £1 million that qualifies for 100% Business Relief will attract no IHT at all. Any qualifying assets over £1 million will be eligible for 50% relief (equivalent to an IHT rate of 20%). At the same time, any shares in qualifying companies listed on the Alternative Investment Market (AIM) will be eligible for Business Relief at a reduced rate of 50%, an effective IHT rate of 20%. However, after a year of considerable debate, the Government made two key announcements. First came the announcement in the Autumn Budget 2025 that the £1 million allowance would be transferable between spouses and civil partners. This brings both Business Relief and Agricultural Property Relief in line with the other IHT allowances, the nil-rate band and the residence nil-rate band2. And in late December 2025, the Government announced that it had listened to concerns expressed by businesses and the agricultural community, and had decided to raise the £1 million allowance to £2.5 million3.
To put things simply, the new changes underline how Business Relief should be a key element of estate planning for wealthier clients. First, individuals can pass on up to £2.5 million of qualifying assets free from IHT. Second, for spouses and civil partners, the combined allowance on the death of the second spouse rises to a potential £5 million And third, it can also be used to ‘rehouse’ pension assets that will be exposed to IHT from April 2027. This is a real game-changer in estate planning terms. However, it’s important for advisers to remind clients that to qualify for Business Relief, shares must have been held for at least two out of the last five years, and must also be held at death. This qualification period also includes amounts withdrawn from pensions. Advisers should also discuss any potential tax implications of pension withdrawals with clients.
It's worth noting that the new £2.5 million allowance for 100% Business Relief only applies to unquoted, or privately owned, businesses. From April 2026, AIM-listed shares will still only be eligible for 50% Business Relief, regardless of the value of the shares. Advisers therefore might want to talk to clients who own AIM-listed Business Relief-qualifying shares as part of an estate planning strategy about transferring to an estate planning service that only invests in unquoted companies. Any transfer from AIM to unquoted Business Relief needs to be assessed case by case, taking account of a client’s age, health and attitude to risk. But for those likely to lose that extra 20% IHT relief from April 2026, there may be value in considering ways to bring the full 40% relief back into scope.
Talking to clients about Business Relief
The difference between unlisted and AIM-listed Business Relief
What does this mean for your clients?
We can't change the rules around IHT, but we can make sure clients do something about their estate while they still can
The April 2027 deadline isn’t far away, and estate planning is likely to be a relatively new concept for many clients. The key thing is to encourage more clients to have those estate planning conversations, as the longer they delay, the less flexibility they have. The good news is that for financial advisers, there are things you can be doing to help more of your clients to secure their legacy and protect their family’s wealth.
Estate planning is a key part of financial advice
Sources 1. obr.uk 2. commonslibrary.parliament.uk 3. www.gov.uk
Three imperatives in a new era for global retirement
Slower global economic growth,1 declining working‑age populations, and the positive trend of increased longevity are placing growing strains on national public pension systems
The global retirement market has made significant strides over the past half‑century, marked by the continued development of multi‑pillar retirement systems and substantial increases in asset values. Yet many of the conditions that aided this progress are shifting, ushering in a new and more complex era for retirement savers.
T. Rowe Price has studied retirement plan design and savings behaviours in the US for decades, with participant insights dating back to 1974. In 2025, we expanded upon our US‑focused research to better understand how savers in Australia, Canada, Japan, and the UK are faring amid economic change and to compare experiences across different retirement systems. The result was our inaugural Global Retirement Savers Study (GRSS), which revealed widespread concerns over longer‑term risks and retirement adequacy as savings struggle to keep pace with life expectancy.2 While stress over personal finances is generally lower among older generations (Fig. 1a), retirement saving is one area where worry persists (Fig. 1b). The shared nature of savers’ financial unease reflects the new economic realities of our time: higher‑trend inflation, uneven growth, and more volatile markets. Retirement savers globally are wrestling with these macro trends and rank inflation, geopolitics, and higher interest rates as their top concerns.3 Understanding how these historic shifts are affecting individual savers across geographies – and addressing those impacts to optimise retirement outcomes – will be a defining challenge for T. Rowe Price, the broader retirement industry, and policymakers worldwide. In the face of this challenge, I see three imperatives to address on behalf of retirement savers globally.
Doubts over retirement adequacy
Sources. 1. World Bank. Global Economic Prospects, June 2025, Washington, DC: World Bank. doi: 10.1596/978‑1‑4648‑2193‑6. License: Creative Commons Attribution CC BY 3.0 IGO. 2. Source: World Economic Forum Analysis, White Paper, “Investing in (and for) our Future,” June 2019 (most recent data available). 3. In response to the question, “Thinking about the next 12 months, how concerned are you about the following?”, a clear plurality (42%) of survey participants identified inflation as “very concerning,” followed by geopolitical events (30%), interest rates (27%), unemployment (20%), and the stock market (16%). 4. In response to the question, “When trying to learn more about retirement, how helpful would each of the following programs or formats be?”, 32% of global survey respondents identified one‑on‑one consultations with a financial advisor as being “very helpful” compared with online courses or video tutorials at 21% and robo‑advisory tools at 13%, among other options. 5. Percentages show responses to a portion of the available answers for the question, “When do you think you will stop working?” At a specific age = 34%, when my savings reliably replace a specific percentage of my salary = 23%, when I reach a target level of retirement savings in terms of account value = 22%, when I am eligible for government benefits = 21%, I expect to work either full or part time = 20%.
Robert W. Sharps, CFA Chief Executive Officer and President
Younger retirement savers report higher stress
To help retirement savers thrive in this complicated environment, we as an industry will need to deliver financial advice, tools, and education more comprehensively. Notably, GRSS respondents identified one‑on‑one consultations with a financial advisor as the most helpful format to learn about retirement,4 and they consistently cited their workplace or organisation’s retirement plan as a primary source of financial guidance. The GRSS data underscore the strong link between confidence and engagement with financial resources. Globally, savers who feel very confident about their retirement are not only more likely to rely on professional guidance, they also find retirement education programs offered through their employer or organisation to be more helpful and accessible. In contrast, nearly half of survey participants with low retirement confidence are unaware of or lack access to such resources, further reinforcing retirement uncertainty. This creates an opportunity to pair retirement plans with one‑on‑one advice and counselling, helping ensure that more retirement savers are able to develop achievable goals and actionable steps. Emergency savings options can augment these resources.
Learn more
To find out more about the evolving needs and priorities or retirement savers, read the full Global Retirement Savers Study (GRSS) here
(Fig. 1a) Share of respondents reporting stress in their financial life
Source: T. Rowe Price, 2025 Global Retirement Savers Study. Note: Percentages reflect responses to the question, “How would you rate your overall level of financial stress on a scale from 0 to 10, where 0 is not stressed at all and 10 is extremely stressed?” Percentages in each bar do not necessarily sum to 100% due to rounding. Generations are defined as the following ages: Gen Z = 18–27, millennials = 28–43, Gen X = 44–59, baby boomers = 60–77, silent = 78–96. For office use only: 202601-5173432
Imperative 1: Delivering one‑on‑one advice and support on a global scale
Budgeting and saving demands are driving financial stress
(Fig. 1b) Retirement savers reporting a high degree of financial stress by category
Source: T. Rowe Price, 2025 Global Retirement Savers Study. Note: Percentages show survey participants’ responses to the question, “Please indicate your level of stress (high, moderate, low, none, not applicable) as it relates to the following areas of your financial life.” The chart specifically shows the share of savers reporting “high stress” per category and does not reflect the full list of categories presented to participants. For office use only: 202601-5173432
21%
23%
20%
13%
19%
11%
24%
28%
26%
9%
16%
In addition to these resources, savers will need access to a broader suite of retirement solutions – because while individuals worldwide face similar headwinds, the path to a confident retirement looks different for everyone. In a volatile investment climate, some retirement investors will benefit from target date (or life cycle) solutions that aim for a smoother ride through retirement while still supporting long‑term outcomes. Amid increased life expectancy and economic uncertainty, many individuals will require a multidimensional approach to the spending phase of retirement – one that lets them choose, as appropriate, from a mix of managed payout tools, annuity options, and liquidity profiles that meet their diverse needs. This approach may take on even greater importance as many retirement markets continue to shift away from defined benefit plans. In some cases, we will need to cast a wider net across asset classes to build more resilient retirement portfolios. Private assets, for instance, are poised to play a more consistent role in parts of the retirement landscape, supported by a growing recognition that diversification extends beyond public markets. However, individuals will need investment providers who can not only skillfully navigate private markets but also explain how private asset building blocks can align with their goals.
Imperative 2: Building local, personalised retirement solutions for better outcomes
This leads to a final imperative: a shared commitment from the public sector to help savers attain retirement security. Favourably, countries around the world are widening pathways for long‑term retirement investing, elevating the importance of private savings in the retirement landscape. Yet greater and more urgent action is needed to sustain the viability of national public pension systems (such as Social Security in the US), which face intensifying funding pressures. These systems form the foundation of retirement security in many countries and should be placed on sound footing. Until comprehensive policy actions are taken, however, our industry will likely shoulder more responsibility for retirement outcomes. This makes it even more critical that we promote universal principles to strengthen the private savings infrastructure globally: automatic enrolment and escalation features to help boost participation and overall retirement assets, emergency savings options to help savers manage unexpected expenses, and robust investment defaults – such as target date solutions – that ensure adequate diversification. These principles can and should take on unique characteristics as countries learn from one another and refine their retirement frameworks to best suit local populations. Building confidence through partnership As a global investment manager and a leader in retirement, our firm recognises the magnitude of the current moment. Savers worldwide deserve to feel confident in their retirement prospects. They need partners who understand that their financial concerns, from inflation to housing costs, aren’t separate from retirement saving but central to it. They need solutions that are sophisticated enough to navigate increasingly complicated markets, yet personal enough to address their unique goals and challenges. This is why we’re expanding our capabilities on a global scale, introduced target date solutions in multiple countries accounting for local factors, and designed comprehensive income offerings for a ‘paycheck like’ experience in retirement. As we pursue these and other initiatives, we will continue to listen carefully to the concerns and aspirations of retirement savers, letting them be our guide.
Imperative 3: Championing a stronger retirement infrastructure
Respondents identified one‑on‑one consultations with a financial advisor as the most helpful format to learn about retirement
Differing expectations further the case for localized solutions
(Fig. 2) Expectations around retirement, by country
Source: T. Rowe Price, 2025 Global Retirement Savers Study. Note: Percentages show the share of survey respondents answering affirmatively to the question, “Given the retirement savings you have in place right now and the rate at which you may be adding to those savings, which of the statements below do you expect will be true for you in retirement?”
= Significantly higher (+20%) than the global average.
A smarter approach As we leverage our capabilities to expand retirement solutions, we must employ a smarter, more localised approach, understanding that a target date strategy in Canada should look different from one in Japan. This is because each country has its own retirement framework and distinct economic and demographic characteristics. For example, expectations around potential aspects of retirement, such as part‑time work or the ability to leave money to future generations, vary meaningfully by country (Fig. 2). We should increase the availability of diversified portfolios constructed to reflect such differences, factoring in national demographics, prevalent employer benefit structures, and other local market nuances to help optimise the retirement experience for each country. Differing expectations further the case for localised solutions However, building retirement solutions for each country is only part of the equation, as each individual has their own life experience and retirement objectives. The GRSS results point to this reality. Globally, savers show no consensus on when they plan to retire.5 While some target a specific age, others aim for government benefit eligibility or certain savings levels. Income replacement goals also differ, with higher earners looking to replace a larger percentage of their working‑age income in retirement. These and other complexities call for more dynamic solutions that help savers achieve the retirement experience they desire. Leveraging individual data to deliver personalised asset allocations is a natural progression toward this goal, one that is starting to gain traction in the US. However, widespread adoption on a global scale will entail engagement with a range of stakeholders, including retirement policymakers.
Private assets are poised to play a more consistent role in parts of the retirement landscape
1 .The statement posed to survey participants included, “…like a major house repair or major medical bill.”
= Significantly lower (‑20%) than the global average.
The growing importance of lifetime gifting
As advisers prepare for the changes ahead, many are taking a closer look at how clients can use exemptions and structured gifting to keep wealth moving through the generations without triggering unnecessary tax.
Lifetime gifting is a key area that can make a significant difference if planned correctly. Professional advice is key to ensuring clients navigate this area successfully and understand the gifting rules – preventing any nasty surprises for their loved ones.
When a client gives money away, the gift will fall into one of three categories for IHT: Exempt – the gift is immediately outside the client’s estate. Potentially exempt transfer (PET) – the gift will fall outside the client’s estate after 7 years (provided the client survives 7 years). Chargeable lifetime transfer (CLT) – as above, the gift will fall outside the client’s estate after 7 years, but the gift may be subject to a lifetime IHT charge of 20%. The first group, exempt gifts, is where we will focus in this article. Annual exemption Clients can give away up to £3,000 each tax year without any IHT implications, and unused allowance can be carried forward for one year. For couples, this means up to £6,000 each year, or £12,000 if the previous year’s allowances remain untouched. Spouse and civil partner exemption Transfers between most long‑term UK‑resident spouses or civil partners are free from IHT. While useful, this exemption only delays the potential tax: the value simply moves to the recipient’s estate, where it may later be taxable. For this reason, many clients look instead at passing money down to children or grandchildren. Gifts out of normal expenditure This exemption remains one of the most powerful. If a gift is part of a client’s regular spending (‘normal expenditure’), comes from income (not capital), and doesn’t reduce their standard of living, it can fall immediately outside their estate with no seven‑year waiting period. There is no upper limit, provided all three conditions are met.
Understanding how gifts are treated for IHT
Income may be deemed capital after two years It’s worth remembering that payments deemed income may not be considered income indefinitely. HMRC may reclassify income as capital if it accumulates in a bank account for more than two years without being used, unless there is evidence to the contrary. This relates to all income payments, not just pension income. Timing and record‑keeping are important.
For further guidance on planning for Inheritance Tax, visit Quilter’s website: Inheritance Tax (IHT) planning | Quilter. There, you’ll find a comprehensive guide to lifetime gifting, practical tools including Quilter’s IHT calculator and excess income tool, details on the Excess Income trust, and a wealth of additional resources to help you navigate this important area of financial planning.
Lifetime gifting is a key area that can make a significant difference if planned correctly
Given the impending tax treatment of pensions, advisers are seeing more clients explore their options earlier. Individuals can deal with excess wealth in many ways, with the most common being: spend it, insure the IHT liability with a life policy, or give it away during their lifetime. Lifetime gifting is gaining momentum because, when structured correctly, it can significantly reduce future IHT exposure while allowing families to support the next generation at the moments that matter — not years later after death. As always, professional advice is essential to secure the most favourable outcome for families, ensuring that planning is both comprehensive and supported by meticulous record keeping.
A renewed focus on lifetime gifting
It’s worth remembering that payments deemed income may not be considered income indefinitely
HMRC will expect to see evidence that gifts were regular or habitual, typically over three or four years, and that the client (the donor) intended to continue making similar payments. Advisers play a key role here: helping clients to keep records, document their intentions, and capture details of each gift. When assessing whether the gift is made from income, HMRC may include interest and dividends, but not withdrawals from existing capital. Where pensions fit into the picture The upcoming IHT changes to pensions have inevitably prompted clients to ask whether pension income, or pension commencement lump sums (PCLS), can be used effectively under these exemptions. Pension payments can be taken in several ways, from a one‑off PCLS to spreading that lump sum over a set period or taking a blended PCLS plus income arrangement. In all these scenarios, it is our understanding that payments will be classed as ‘income’, meaning gifts made from them could satisfy the ‘normal expenditure’ exemption — as long as all three conditions are met If not, clients may fall back on the standard £3,000 annual exemption or rely on the gift being treated as a PET.
What counts as ‘normal expenditure’?
For more information on the IHT treatment of pension gifting read Quilter’s quick reference guide.
Shaun Moore Tax and trust specialist, Quilter
