Seizing the 2027 Mandate: How advisers can capitalise on the end of pension IHT exemptions

Gareth Davies, pension specialist at Scottish Widows, highlights the April 2027 inheritance tax changes as a major shift for advisers, with unused defined contribution pensions set to become far more central to estate planning discussions.

In less than a year, the advice industry will undergo one of its biggest landscape shifts since the introduction of Pension Freedoms in 2015. From 6 April 2027, unused Defined Contribution pension pots that push an individual’s estate over the Nil-Rate Band could be subject to 40% inheritance tax.

While many will view this as a looming regulatory hurdle, I believe that advisers should see it as a powerful opportunity to get ahead and futureproof their value proposition. Viewed through that lens, it’s a unique window to engage with clients and demonstrate the tangible value of advice in estate planning while remaining competitive in a changing advice landscape.

Capitalising on this shift will mean looking beyond the technicals and viewing it through with a growth and transition lens. 

Breaking down silos

For many years, pension savings have been viewed as an efficient vehicle for clients to pass on their wealth, akin to a family trust, often sitting at the centre of IHT planning strategies. Next year’s change breaks this long-standing perception and will challenge advisers to revisit plans that may have been built on this assumption. 

New rules call for new strategies, and research from our latest Investor Confidence Barometer demonstrates that advisers are already adapting. When asked about how they are preparing, advisers pointed to a range of tactics, including lifetime gifting (55%), use of family investment companies (18%), and tax-wrappers such as ISAs (37%).

This represents a larger shift to the way we approach intergenerational advice considerations. With pensions no longer able to be considered as an inheritance tax efficient wealth transfer vehicle, advisers will need to connect retirement, tax, and estate planning more closely than ever before. The firms who can best execute this pivot and upskill advisers accordingly will become best positioned to benefit in this new landscape. This also represents a unique opportunity to work with probate solicitors and create a more joined up approach to dealing with the distribution of estates after the death of a client, once pensions are included in this conversation after April next year.

A generational play 

The “Great Wealth Transfer” is no longer a distant trend – but is happening around us at this very moment. Historically, bringing a client’s children or grandchildren into advice conversations could feel unnecessary or premature, but the inclusion of pensions in the death estate provides a perfect, non-intrusive reason to approach this subject. The need to review and possibly update pension death benefit nomination forms could be a perfect opportunity to engage with the wider family.

By framing the 2027 changes as a family-wide estate challenge, it not only demonstrates the value of timely advice for current clients but reframes support from individual advice to family strategies. Building a solid, multi-generational customer base is the best futureproofing strategy an advice firm could ask for. Involving beneficiaries in planning today helps familiarise them with the process years in advance – allowing for continuity of wealth planning, and longevity of value proposition.

Fine-tuning the operation

With under 12 months left until the rule change, now represents the best chance to do some business ‘spring cleaning’. A primary job here is auditing the existing client base and categorising them into groups based on how immediate their needs are. By ensuring that the clients with the largest pots, or most pressing estate planning requirements are seen in the short-term, it will help reduce the likelihood of a bottleneck in early 2027.

Aside from the potential tax liability itself, the additional administration requirements for unused pension funds on death are significant. Consolidating legacy assets now could be a practical way for advisers to ease the future burden on families and legal representatives, simplifying an otherwise complex probate process.

Such a landmark shift also represents a good opportunity to review your firm’s current value proposition and fee structure. By ensuring your intergenerational value proposition is competitive, represents good value, and is adjusted to suit a post 2027-landscape, it will help to mitigate the risk of increased client scrutiny around value – particularly as the role of pensions within estate planning evolves. It could also be the ideal opportunity to consider additional time-costed charging structures following the death of a client, to ensure the extra administration burden post death can be managed profitably.

By pivoting toward more holistic intergenerational advice, engaging the wider family unit, and embedding the operational hygiene necessary to prevent a 2027 capacity bottleneck, firms can de-risk their practice while unlocking new opportunities of growth. This change could be the ultimate stress test for advice firms, while also offering the opportunity for advisers to engage with, add value to, and secure the next generation of client wealth.

By Gareth Davies, Pension Specialist at Scottish Widows