Why advisers should be talking about legacy planning now
Our latest ‘Permission to spend’ research reveals an interesting challenge for advisers: many retirees may be on course to leave behind more money than they ever intended.
In Wealthtime’s latest Permission to Spend research that was conducted by Ad Lucem, a third (34%) of affluent retirees expect to pass on more wealth than they’d ideally like when they die. With most unused pension wealth set to fall within the inheritance tax (IHT) regime from April 2027, that could have significant implications for both retirees and their families.
The findings suggest that what appears to be prudent financial behaviour may sometimes be preventing clients from making the most of retirement, while potentially creating larger inheritance tax liabilities than anticipated.
Many families would rather retirees enjoy their wealth
One of the most striking findings from our research, more than two in five (42%) affluent retirees believe their family would prefer them to enjoy their money now, compared with just 16% who think their loved ones would rather receive a larger inheritance.
Yet these conversations are not always happening. One in five (21%) retirees have never discussed inheritance expectations with their family, or simply don’t know what their loved ones would prefer.
For advisers, this creates an opportunity to facilitate meaningful conversations that help families align expectations and ensure financial plans reflect what matters most to everyone involved.
Pension inheritance tax changes could add another layer of complexity
The timing of these findings is particularly relevant.
From April 2027, most unused pension funds are due to be brought into scope for inheritance tax. While industry attention is understandably focused on what may or may not emerge from future policy announcements, these changes are already legislated and fast approaching.
Despite this, awareness remains surprisingly low. Nearly half (48%) of pension holders in our research were unaware of the upcoming changes or had only heard about them in passing, while a further 23% said they were aware of the changes but unsure of the detail.
The reality is that many clients may not raise the subject themselves because they don’t yet understand how it could affect their estate.
Clients are starting to reassess their plans
Where awareness does exist, many people are already reviewing their approach.
Among pension holders who are aware of the incoming changes, the most common actions being considered include:
- Reviewing wills and estate planning arrangements (35%)
- Seeking financial advice (31%)
- Taking additional income from pensions (28%)
- Bringing forward gifts to family members (26%)
These findings suggest clients are looking for guidance, but not necessarily initiating conversations with their adviser.
Don’t wait for clients to ask
Our adviser research revealed relatively little evidence of clients proactively raising concerns about the pension inheritance tax changes.
Instead, advisers most commonly reported seeing an increase in questions about death benefits (24%) or clients delaying decisions while waiting for greater clarity (23%).
With many clients still unaware of the changes, waiting for the topic to arise naturally may mean missing an important planning opportunity.
Whether it’s discussing spending confidence, gifting strategies, estate planning or family expectations, advisers are uniquely placed to help clients make intentional decisions about their wealth rather than drifting towards outcomes they never wanted.
Helping clients spend with confidence
A core theme running throughout Wealthtime’s Permission to Spend research is that many retirees don’t necessarily need more wealth. What they need is confidence.
Confidence that they can afford to enjoy retirement. Confidence that their loved ones will be looked after. And confidence that their financial plan supports both their lifestyle goals and their legacy ambitions.
As the pension inheritance tax changes draw closer, there’s an opportunity for advisers to help clients navigate these conversations and ensure any wealth they leave behind reflects a deliberate choice rather than an unintended consequence.
Sophie Hall, Wealthtime Commercial Director commented, “Retirees who don’t feel they have permission to spend can end up leaving larger legacies than they wanted to, and from April next year that could land their families with a higher inheritance tax bill. With half of pension holders knowing little or nothing about the rule changes, it’s unlikely they’ll raise the subject themselves. Advisers are well placed to get families talking about legacy plans, rather than waiting for clients to ask, or for the next scheduled review. Whatever the Budget brings, leaving unspent wealth should be a choice rather than an accident.”
Download the research
Explore Wealthtime’s latest Permission to Spend research and download the guide to discover how advisers can help clients build confidence around spending, navigate changing pension and inheritance tax rules, and create retirement plans that truly reflect their goals.
Stay connected
This article is intended for regulated financial advisers and investment professionals only. Wealthtime does not provide financial advice. This information is not intended as financial advice and should not be interpreted as such.
linkedin
facebook
mail