Nearly half of financial advisers report that clients are reducing pension contributions to invest in Inheritance Tax (IHT) planning solutions ahead of new rules that will include unused pension funds in estates from April 2027, according to research from Downing.
The study found that 47% of advisers have clients cutting pension payments to focus on IHT planning, while a further 30% said clients are withdrawing money from pensions to invest directly in IHT mitigation strategies.
The policy, confirmed in the Autumn 2024 Budget, will see unused defined contribution pension funds included in estates and subject to IHT.
The Government expects the change to raise £3.44bn over its first three years, with more than 10,000 estates paying IHT for the first time and 38,000 paying more than they otherwise would have.
According to Downing’s survey, almost all advisers (94%) believe the reforms will drive innovation in IHT solutions, as clients seek new ways to manage intergenerational wealth transfer.
Three in four (75%) advisers said they expect to review and adapt existing IHT planning for between 20% and 30% of their clients, while 61% predict at least a 15% increase in the proportion of their clients facing an IHT liability.
The findings also showed that 75% of advisers are seeing clients increase pension withdrawals in response to the change, with 47% using the funds for gifting or reducing contributions altogether.
Around 36% said clients are redirecting pension savings into property investments.
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.”
