Changes to inheritance tax rules are changing the sequencing conversations advisers are having, a new report from later life lending platform Air has shown.
The report ‘The Home Belongs in the Plan’, produced with Technical Connection and Ad Lucem, suggests that ‘best practice’ drawdown and intergenerational planning strategies are being re-thought founded on an ‘all asset’ basis, which includes the family home.
In 2024/25, FCA retirement income data showed the overall value of money withdrawn from pension pots rose 36% year-on-year to £70.9 billion, while tax free cash withdrawn jumped 60.7%. According to Air, the figures are a sign that many families are bringing liquidity decisions forward as they reassess how to fund retirement, gifting and legacy plans amid changes to IHT rules which will see pensions included in its scope from April 2027.
While for some people, releasing funds from their pension will enable them to plan for themselves and their family, for others this liquidity will not be enough for them to achieve their goals, Air said.
The report cites research showing that nearly half of under-35 year-old homebuyers received financial help from family in 2024, with the average contribution around £27,500.
Against that backdrop, the report argues that it is becoming harder to have truly holistic planning conversations with clients without acknowledging the scale of housing wealth. Data from the Equity Release Council estimates UK homeowner equity at £5.7 trillion, including £3.4 trillion held by over-55s.
However, while later life lending can help achieve outcomes, it involves costs and can reduce overall inheritance. Air said advisers should adopt a Consumer Duty-aligned advice process that keeps a clear set of alternatives available, explains costs and trade-offs in plain English, tests and records client understanding and uses referral routes where appropriate.
Tony Wickenden, founder and managing director of Technical Connection, said: “Clarity over “the numbers” is absolutely essential before any decisions are made but it also has to be recognised that the role of financial planning is to help clients achieve what is important to them in life.
“Many clients want to support children and grandchildren at pivotal moments – but they’re understandably wary of dismantling portfolios or compromising their future financial security. The point isn’t to push a product; it’s to build a disciplined, repeatable way to weigh options, explain trade-offs and document understanding so decisions are genuinely informed and which, when appropriate, incorporate at least a consideration of how the main residence and later life lending could be used.”
Will Hale, CEO of Air, added: “With pensions set to fall into IHT from 6 April 2027, the old sequencing rules are being re-written and ‘which pot do we spend?’ has become one of the most consequential questions families will ask.
“This is a question advisers can’t afford to answer on autopilot. Our aim is to equip advisers with the insight, tools and support to bring the home into that conversation safely – whether that means establishing referral partnerships or building capability over time.”
Main image: luke-chesser-pJadQetzTkI-unsplash
