Nearly half (47%) of advisers say clients are cutting pension contributions to invest in inheritance tax (IHT) solutions ahead of the deadline for unused pension funds being included in estates, new research [1] from investment manager Downing shows.
The Government has confirmed that from April 2027, unused defined contribution pension funds will be included in estates and subject to IHT, as proposed in the Autumn 2024 Budget.
In Downing’s survey of UK financial advisers and wealth managers, a further 30% questioned said clients are taking money out of pensions to invest in IHT planning solutions.
Almost all (94%) questioned believe the inclusion of pensions within estates will drive innovation in IHT planning solutions from providers.
The survey found that three out of four (75%) of advisers may need to adapt their current IHT planning for between 20% and 30% of their client base in response to the inclusion of pensions in estates.
More than six out of ten (61%) estimate there will be a 15% or more increase in the percentage of their client base facing a potential IHT liability as a result of the decision.
The Government estimates [2] the change will raise an additional £3.44 billion in IHT over its first three years of operation, with around 10,500 estates paying IHT in 2027/28 who would not have done so previously, and another 38,000 paying more IHT than they would have previously.
The study for Downing, which has around £1.2 billion total assets in estate planning solutions, found that 75% of advisers say clients are increasing the amount of income they take from pensions in response to the new measures.
Nearly half (47%) are taking money to give as gifts or cutting contributions. Nearly two out of five (36%) are switching pension contributions to investing in property.
Mark Dunn, Head of Retail Sales at Downing says: “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.”
Downing has a suite of estate planning solutions, depending on the client’s situation and investment preferences. The company recently launched the Downing Growth Estate Planning Service which aims to provide IHT relief after two years, if held at the date of death, and targets returns of 5% to 7% p.a. The Service could be attractive to younger investors with a longer investment horizon, who, following the Pension Reforms announced in last year’s Budget, will now potentially face an IHT liability.
The Service offers higher-return potential within BR-qualifying asset-backed businesses, managed by an experienced investment team.
For more information go to Inheritance Tax Solutions – Specialist IHT Products | Downing
1 Downing commissioned independent research company PureProfile to interview 100 UK financial advisers and wealth managers using an online methodology during August 2025.
ta2 Inheritance Tax on unused pension funds and death benefits – GOV.UK
3 Up to the age of 90 years, covers up to £750,000. T&Cs apply, see policy for full details
