Financial advisers are reporting a sharp rise in demand for estate planning guidance as clients respond to forthcoming inheritance tax (IHT) reforms that will include pension wealth in estate valuations from April 2027, according to research from Transact.
A survey of 260 advisers found that 59% expect the changes to increase demand for advice, with a clear shift in client focus towards intergenerational and estate planning.
Advisers identified three key strategies likely to dominate client planning over the next few years: trust-based planning (54%), gifting out of surplus income (47%), and the use of investment bonds (44%).
Advisers also anticipated a rise in lifetime gifting, including exempt transfers, potentially exempt transfers (PETs) and chargeable lifetime transfers (CLTs).
Many believed it may become more efficient for clients to withdraw and gift pension funds during retirement – even where this incurs income tax – in order to reduce future IHT liabilities.
The survey follows the publication of the latest Transact Inheritance Tax Index, which draws on data from the Office for National Statistics’ Wealth and Assets Survey.
The Index projected that the number of UK households potentially subject to IHT will more than triple as a result of the 2027 reforms, increasing from 1.6 million to 5.1 million.
This marks a reversal of the decline seen after the introduction of the Residence Nil Rate Band in 2017.
Andrew Cullen Jones, chief development officer at Transact, said: “The inclusion of pension wealth for inheritance tax purposes will fundamentally alter the financial planning landscape for families who previously fell below the threshold.
“We are already seeing advisers respond with more proactive and sophisticated strategies, from the use of trusts and gifting plans to reassessing pension withdrawal approaches.
“These reforms will make tailored financial advice more valuable than ever, ensuring clients can manage their exposure and pass on wealth efficiently.”
