Incoming inheritance tax liability (IHT) on pensions is forcing change in how financial advisers spend their time and what they discuss with clients, according to Flagstone's latest poll of UK financial advisers*.
Key findings:
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64% of advisers are spending more time improving their own understanding of the shifting IHT framework
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31% are spending more time on compliance and documentation associated with the impending change to pensions
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15% say spending more time exploring platforms and technology they’ll need to suit changing client requirements
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And 43% feel disappointed that they don't have all the answers on the subject for their clients.
These changes to how advisers are working come just as the focus of their client interactions is altering too:
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79% of advisers are spending more time discussing implications of IHT on pensions with their clients
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73% are spending more time talking to clients about estate planning more generally.
Claire Jones, Head of Strategic Relationships and New Business at Flagstone, comments: 'The plan to lift IHT exemption on pensions is causing vast changes to advisers’ working lives. They are grappling with what this all means for how best their clients can not only plan their estates but manage their day-to-day retirement spending. It’s forcing some delicate conversations between clients and their families, and it must be frustrating for advisers to know that they haven’t yet got all the facts to hand to make the best possible strategic recommendations.'
'Rumours of changes to pensions tax relief only add to the complexity of the situation facing advisers right now. Speculation and extended deliberation are no good for anyone. The government needs to clarify its long-term intentions for pensions this Autumn, after which advisers can increase their own understanding and maximise the time left before changes take effect to get their clients’ affairs in order.'
Flagstone's poll also shows a marked shift in which strategies advisers are discussing the most with their clients. Regular gifting (84%), irregular but substantial gifts (25%) and spending pension money (76%) are some of the strategies advisers are discussing the most with clients right now. This is driven by clients’ biggest concern: leaving tax bills for beneficiaries to handle.
Jones continues: 'Actively gifting substantial sums before death demands a complicated overhaul of every client’s estate planning strategy. In addition to the data, what we’re hearing about anecdotally is a growing trend towards ‘whole-of-life’ insurance policies that protect pensions in life and after death. Whatever happens, it’s highly likely that more people of pensionable age will be drawing down higher volumes of cash than previously. Ensuring these clients are well-appraised of the cash management strategies available to them will be more important than ever too.'
Advisers’ independent perspectives:
Jonathan Pollack, Twelve Wealth Management, Partner Practice of St. James’s Place: 'Many people don’t know the value of their pensions and will be caught off-guard when they realise the extent pensions can increase the value of their taxable estates from 2027. People will also need to save for retirement and pensions are an extremely tax efficient way for the government to incentivise people to do so. I’ll always recommend clients to save into pensions. Where my advice is shifting is in regard to what people do with that pension money once in retirement. The hardest part of planning someone’s retirement with them is convincing them to spend the money they’ve spent 40 years accumulating. However, I expect we will see a lot more people take money out of their pensions and spend it from now on.'
Charlie Okell, FLM, Partner Practice of St. James’s Place: 'I have sensed an increasing willingness from clients to spend more for themselves in retirement. Overall, I expect tax-free cash and income from pensions to be taken earlier in the future. We are seeing a significant rise in interest around whole-of-life insurance policies, triggered by inheritance tax soon to be levied on pensions. Clients are looking at these policies to compliment a holistic financial plan.'
* Survey of 127 UK financial advisers by Flagstone, July 2025
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Jo Candy: 07909 992082 | jo@ripplecomms.co