Independent financial advisers (IFAs) are urging clients to increase pension withdrawals in the run up to 2027. This is when changes are being introduced to the way UK inheritance tax is calculated.
According to retirement specialist Claire Altman, the fact inheritance tax will cover pension assets is having a significant impact on how IFAs advise their clients as 2027 looms.
A recent survey found that around four in five IFAs are reassessing how pensions are used by clients as retirement income, with one in 10 indicating they are reviewing the role of pensions in retirement planning.
A further 69% said they advised increasing withdrawals from pensions, of whom 43% recommended clients to boost their expected retirement income by around 5%. Traditionally, the recommended pension withdrawal was 4%.
Currently, inheritance tax is payable at 40%, over the £325,00 nil-rate band. Some people also qualify for a £175,000 residence nil rate band, which enables them to transfer allowances to their spouse after death. As such, more families will find themselves drawn into the inheritance tax net in the years ahead, with tax-free allowance likely to be frozen at least until 2030.
It is estimated that the richest 4% of families are liable for inheritance tax. Last year, inheritance tax receipts rose to a record total of £7 billion, up from £700 million in 2023.
If you are inheritance tax planning in Cheshire and require bespoke advice, reach out to our specialist team at Hartey Wealth Management today to set up an appointment.
