Nearly half (47%) of advisers and wealth managers say clients are cutting pension contributions to invest in inheritance tax solutions ahead of the deadline for unused pension funds being included in estates, new research from Downing has shown.
A further 30% said clients are taking money out of pensions to invest in IHT planning solutions.
From April 2027, unused defined contribution pension funds will be included in estates and subject to IHT.
Downing said that almost all (94%) of those surveyed believe this change will drive innovation in IHT planning solutions from providers.
The survey also found that three quarters (75%) of advisers may need to adapt their current IHT planning for between 20% and 30% of their client base in response to the inclusion of pensions in estates.
Meanwhile, more than six in 10 (61%) estimate there will be a 15% or more increase in the percentage of their client base facing a potential IHT liability as a result.
Government estimates suggest that the policy change will raise an additional £3.44 billion in IHT over the first three years of operation, with around 10,500 estates paying IHT in 2027/28 who would not have done so previously. A further 38,000 estates will pay more IHT than they would have previously.
Downing’s survey also found that 75% of advisers say clients are increasing the amount of income they take from pensions in response to the new measures. Nearly half (47%) are taking money to give as gifts or cutting contributions. Nearly two out of five (36%) are switching pension contributions to investing in property.
Mark Dunn, head of retail sales at Downing, said: “The inclusion of unused pensions within estates has fundamentally reshaped the inheritance planning landscape, forcing advisers and clients alike to rethink how they balance long-term income needs with intergenerational wealth transfer.
“The policy change is driving a wave of innovation in IHT solutions, and advisers are now treating pension pots not just as retirement income, but as strategic assets for estate planning.”
