As of April next year, pension funds are expected to fall within a person’s estate – which could significantly change the way they are used in later-life and estate planning.
In the past, pensions have often been used for more than retirement income. Under the current rules, most funds sit outside of the estate for Inheritance Tax purposes in the event of a death.
This change doesn’t mean that every pension will result in an IHT bill, but it does mean that any plans built around the current rules may need to be reviewed.
Why this matters
For people with significant pension savings, ISAs, investments or other assets, this change could affect how wealth is passed on by influencing decisions around:
- How pension income is taken
- Whether pension nominations are up to date
- How wills and estate plans are structured
- The timing and use of gifts
- How beneficiaries are affected
IHT receipts have already reached £8.5bn in the previous financial year, and are forecast to rise to £14.5bn by 2030/31. This means for a lot of individuals with more than £500,000 and couples with more than 1 million will find estate planning to reduce the inheritance tax burden more and more relevant to their financial goals.
How pension income is taken
Whether pension nominations are up to date
How wills and estate plans are structured
The timing and use of gifts
How beneficiaries are affected
Stay ahead of the game
2027 might feel like a long way off, but issues around estate planning always benefit from planning ahead.
That’s not to say that a review has to involve big changes. It could simply confirm that your existing arrangements still fit your circumstances. But when action is needed, having that extra breathing room can make a huge difference.
If you have pension savings and other investments and you’re considering how your wealth will be passed on to your family, contact us for some clear, reliable guidance.
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If you’d like to discuss your requirements please feel free to contact our advisors