Inheritance tax changes prompt rise in pension spending and family gifting

Older individuals with significant pension savings are increasingly exploring ways to enjoy their wealth during their lifetime, rather than risk passing on additional inheritance tax (IHT) liabilities to their families. This follows the government’s recent announcement that unused pension funds could become subject to IHT from April 2027.

The financial planning sector is undergoing considerable change. Including pensions within the scope of IHT is expected to fundamentally alter how wealth is structured for inheritance, encouraging many to rethink traditional approaches to estate and retirement planning.

There is a growing trend of people choosing to spend more during their lifetime and to support loved ones earlier than they might have previously considered. Gifting is becoming an increasingly popular strategy, with many parents and grandparents helping adult children with lump sums for major milestones, particularly to assist with housing deposits, whether to get onto the property ladder or to move to a larger home.

Recent data highlights this: that gifts and loans from parents for house deposits totalled £9.3 billion in 2023, up significantly from £5 billion in 2019.

There are several different gifting allowances and exemptions, and it is important to seek advice in order to maximise these and ensure you have the correct supporting documentation to present to HMRC.

It is also important to consider, when making gifts or loans, to assist family getting on the property ladder, whether a declaration of trust is required to evidence the interests of each owner.

As the rules around pensions and inheritance evolve, now is an important time to review your estate planning strategies. The Wealth Preservation team at Greenwoods is here to provide expert guidance on all aspects of estate planning. We work closely with you to protect and preserve your assets, ensuring that your plans are tailored to reflect your wishes, safeguard your legacy, and support your loved ones for generations to come.

Get in touch with our Wealth Preservation team.