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Estate planning ignorance is opportunity for advice firms

26 March 2019

Advised clients are far more knowledgeable about the benefits of estate planning and particularly use of pensions for inheritance tax planning purposes, than the non-advised general population, new research has revealed. This creates opportunities for advice firms. 

Nine in ten advisers said their clients were aware of the changes to pension death benefits following the introduction of the pension freedom changes in 2015, with 91% also saying they have seen a marked interest from clients in using pensions as a vehicle for inheritance tax planning, according to research by Canada Life.

In contrast, two-thirds (67%) of non-advised over-55s are not aware of the tax changes. Among those earning in excess of £45,000 – the most likely group to benefit from the changes – only 41% admitted to knowing about the changes.

Andrew Tully, technical director at Canada Life, said the disconnect in enthusiasm between advised and non-advised individuals shows that promoting changes for estate planning purposes to new prospects could have a positive impact.

He explained: “The market for advice is potentially huge. Having benefited from the growth in house prices, increasing numbers of baby boomers are being dragged into the inheritance tax net. Estate planning is, or should become, a big focus for many. This offers an opportunity to advisers looking to expand their customer base.”

The findings surrounding the ways in which people expect to pass their assets on to next generations also highlighted a lack of awareness of the advantages around pensions.

Property remained the most popular choice, with 92% of over-55s planning to leave their property as part of an inheritance, while 78% plan to leave cash or investments. Just a quarter (25%) plan to leave their pension.

According to Alice Watson, head of marketing and communications at Canada Life Home Finance, the research highlighted an opportunity for advisers to broach the subject of equity-release to help provide retirees with an income while preserving their pension.

She said: “Although the equity release market has been growing significantly for the last few years, many people are still wary of drawing on their property wealth. Our research reveals just how few over 55s expect to use equity from their home to provide income in retirement.

“But if people’s priority is to ensure that their family, friends and causes close to their hearts are left with as much as possible, it’s important that they consider all the options, including equity release.

“The challenge for advisers is to overcome the emotional hurdles that too often prevent those who would benefit most from viewing their wealth holistically from doing so.”

Andrew Pennie, marketing director at Intelligent Pensions, added: “The pension freedoms have certainly put a different dimension on estate planning. It’s captured the imagination of clients, particularly those with higher net worths, who’ve picked up on the fact they can pass their pension funds down in a way that wasn’t possible before.

“However, we’ve found that this has typically been the case for more sophisticated clients, who are more conscious of their pension savings, and possibly more attuned to these opportunities than the general public.”

 

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