Seven in 10 (71%) UK financial advisers are worried about pensions becoming liable for inheritance tax, a new survey by Quilter has revealed.
Advisers said more than half (52%) of their clients will be impacted by the rule change.
In the Autumn Budget, Chancellor Rachel Reeves announced that from April 2027, pensions will be subject to IHT. It follows fiscal drag, cuts in capital gains tax allowances and the abolition of the lifetime allowance, which have collectively complicated and increased the tax burden on UK taxpayers, the wealth manager said.
As a result, advisers expect 38% of their client book will need ‘rewrapping’ to alternative tax wrappers in the next 12 months.
Quilter said there were a number of ways advisers could look to do this, including re-evaluating existing General Investment Accounts in light of the reduced annual dividend and CGT allowances; re-evaluating advice for clients who have reached their maximum PCLS amount in their pension plan; and re-evaluating IHT efficiency now that IHT limits are frozen until 2030 and pensions are set to fall within the IHT scope.
Roddy Munro, head of technical sales at Quilter, said: “The financial planning landscape is undergoing dramatic changes, prompting advisers to carefully assess the impact on their clients. The inclusion of pensions within inheritance tax will fundamentally alter how wealth is structured for inheritance.
“This shift presents a significant opportunity for advisers to demonstrate the value of their expertise as clients now more than ever need professional advice to avoid a substantial increase in their tax burden.”
Quilter said the survey also revealed strong demand for technical advice, with 80% of advisers seeking more information on IHT and trusts and 58% looking for guidance on reframing pensions in light of IHT changes.
More than half (52%) also want further insight into investment bonds.
Munro added: “We are already witnessing advisers seeking a broader array of tax wrappers and trusts to adapt to the evolving landscape. As fiscal policy continues to evolve, it is crucial for advisers to have access to clear, practical solutions to help their clients achieve the best possible financial outcomes.”
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