Changes to Inheritance Tax on Pensions from April 2027

Good afternoon and welcome to this Professional Advisor webinar on the shift towards IHT on pensions. I'm Jen Frost, Editor of Professional Advisor. I'm joined today by Octopus Investments Tax Specialist Toyin Oyenen, Court of Tax and Retirement Specialist Kirstie Anderson, LNG Retail Distribution Director for Retail Annuities, Cecilia Furner and Time Investments Billy Brown.

We'll be discussing what the IHT on pensions change, described as a seismic and for some unwelcome shift, means for advisors and clients and looking at how you can prepare. We will also be taking questions this session. If you have a question, please do leave a message in the chat function and we will get to as many as we can.

Now the change was of course announced in last October's autumn budget and Chancellor Rachel Reeves also unveiled a slew of other tax changes, including alterations to business and agricultural reliefs. Despite financial services opposition, the government has pushed ahead with its IHT on pensions proposals with further clarity and some small tweaks shared in the summer.

The new rules are expected to come into force from the 6th of April 2027. So this has been described, as mentioned, as quite a seismic shift for the industry, for advisors, for the public as well. What's really changing here and how big is it from your perspective? If we can start with Toyin.

So I speak to and we work with advisors every day and it is a seismic shift. Pensions are a significant amount of wealth and value in a client's estate.

Up until April 27, it's still free from IHT, but actually bringing that in changes the plans that they had in place for how they were choosing to pass on wealth to their beneficiaries in an efficient way. So really what we're seeing is many advisors we speak to have said they're essentially having to redraw their plans with their clients again. They're having to start again, which, as you said, it might be unwelcome to some for different reasons. Also, the time is going to take them to understand really what this means for my client and how do we find a way back to their original intentions.

And I think just to add to that as well, that similar to Toyin, I speak to advisors every single day and, you know, the change is astounding and I think they're very much grasping the enormity of this. But I do feel that to a degree we've all really focused on the IHT liability as at 6 April 2027. And I think what we need to remember, of course, is that, you know, longevity, clients are going to live 10, 20 or 30 years.

So depending on, you know, the property value increasing and the pension returns and other savings and investments, I genuinely do think that there's going to be a lot of clients who have never had to think about IHT before now that will now be affected just, you know, by returns and its very nature.

So I think advisors, very similar to what Toyin just said, are very much thinking, how do we go about this? All the things that we've usually done, we're literally going to have to turn on its head so that we can get the right plan in place to mitigate this IHT liability as much as we possibly can. Thank you, Kirsty.

Cecilia. Thanks, Jane. And thanks for having me. It's lovely to be here with your with our fellow panelists. I think it's a pivotal change.

You know, the headline change of potential inclusion of unused pension funds makes you think that, in other words, pensions are now going to shift to just being another, you know, taxable estate asset, really, if you think about it.

But there's something more to this for me. It's not just a tax story. It's also a behavioural story. We spoke about this before we start the recording today. And it's all about, you know, we know that financial planners and intermediaries will play a vital role to make sure that as we lead up to April 2027, they have those conversations and they really guide their clients through it.

Thank you. Billy? I mean, obviously, an awful lot's been covered there covering the main points. I think for me, and again, from the advisors that we speak to, just like everyone else, the real focus here is actually this seismic change brings huge opportunity.

You know, we have moving from a position where pensions, although they're for income, were a fantastic IHT opportunity and that tailored with all of the other options that advisors had available, offered huge planning solutions. This is now turned on its head.

And those advisors that are ready to take that step to delve into new products they may have not used before, solutions that combine well business relief trusts in combination with everything else, can probably take a sort of front foot in this new world and make a real impact in demonstrating the value that they can now bring to advice with these individuals.

And I think perhaps that 2,000 of you have signed up to join us today, perhaps demonstrates that sort of significance of this change. Now, as sort of mentioned in my introduction there, the government has also looked to bring in other changes around business and agricultural property relief. We're also looking at threshold freezes. How does this sort of all combine to sort of impact on the public, to impact on clients and to impact on advisors?

Yeah, so I think ultimately with so much change, I think advisors are now realising that all of the things that they have always done just can't be taken for granted. The route that they would, that they have always taken before are the things that they've considered.

They need to fundamentally look at all of the different options that are available. I mean, Toyin, I think you spoke earlier about, you know, the freezing off the tax landscape, actually the significant impact that that has. And what we've not even touched on is the fact that pensions being part of the estate will possibly affect resident no rate bans as well. So it's quite significant.

So again, when I'm speaking to advisors about this and the impact of this, there absolutely will not be one solution for everybody. It's going to be a very, very individual basis, taking into account all of the products, all of the solutions, the trust planning options that are available to work through that for not just the client, for their beneficiaries.

You know, at the end of the day, this is awful, but they won't be here. It's actually, how do we save their family a significant amount of money and tax? Yeah. Yeah.

And I completely agree. I think it's more using the breadth of the estate planning strategies out there. We're going to see that a lot more as a result of these changes. And business relief, I know you mentioned, is one of them. It's one of many. We are seeing that as coming more to the forefront, although it's been here for 40 years, 1970s, I think over.

But it's in the estate planning strategy, I think, that is intertwined because people are trying to find ways to find some efficiency, perhaps in that part of the pension pot, in a way that perhaps could be quicker with business relief being one of the fastest estate planning strategies out there.

And I think definitely, to your point, I think that we discussed earlier, that it's a double impact some people don't realize. So when an advisor is looking at a client's estate or re-looking at the estate plan, you should really look at the knock-on impacts of including the pension in there, which, as we mentioned, the thresholds are frozen until April 30. Brenton's no-weight plan can be impacted once you bring that pension into the estate. So there's a combination of tax, but also strategies you should really be looking at. Absolutely.

And there's a real opportunity there. Again, I mean, I think we kind of focus till now about on financial planners and the existing client base. But I guess if you look at potentially in the key statistic of what's being forecasted, we're being told that 10,500 additional estates will probably get caught into paying IHT now for the first time due to the changes.

And then is it 38,500 will pay more IHT than they would have on the current legislation in April 2027. So again, it goes back to the point of the opportunity for us as a profession to make sure that clients out there, potential clients out there, get the right guidance to make sure what it will be absolutely be the most crucial decisions that they make and will impact, because you said the next two, three, four decades of their journey in retirement.

Absolutely. I think those stats there, they speak to themselves. You've got 10,500 new estates that will be potentially liable for IHT. That's 10,500 individuals that have potentially never had an IHT liability raised than before.

And there is that conversation piece we have to have of, yes, sometimes burying your head in the sand and not knowing about it can be one answer. But if you're not showing an individual what the impact can be, it opens up a raft of other questions.

And the big thing we've not touched on really yet, which is kind of coming down the line, and Kirsten, you mentioned, you know, 10, 15 years down the line with those products that grow over.

What about those beneficiaries, that next generation? You know, advisors, again, business relief, pensions, whatever it is, I think advisors are at the coalface of being able to do something quite different, you know, approach those beneficiaries, approach those new opportunities, and build and maintain a relationship with you. If you've got those many thousands of estates which will potentially disappear from your book, that is a risk in itself. So again, opportunity, seismic, it's not just product focused, it's the advisor focus.

And what's an opportunity for intergenerational planning? Yeah. Yeah, yeah, yeah. But it's massive for financial planners to now make sure that they engage with that next generation, get the adult kids in, have the conversations. Not only is it, if you think, you know, the shift of wealth to, well, we are now in 2025, and we say 60% of the UK wealth is owned by women at this point. So make sure that you speak to the right people, but also you're bringing those adult children to make sure that... And the way you communicate as well.

The way you communicate. Yeah, we are moving into a new world. You don't want to talk, you don't want to sort of raise the, you know, the questionable marketplace of influence and bits and pieces of that. But we need to consider how we're going to be getting the messaging and opportunity, what is out there.

Again, bringing it back to the initial question, sorry, on business relief as well. You know, we now have advisors and clients that have approached us sort of saying, what is this allowance? Because business relief has always been there, as you said, Toyin, but actually, you know, this has been actually fantastic for the marketplace. People now have an allowance. You have a, you know, you've got your allowances for pensions, for ICAs, for your CGT allowance. You now have a business relief allowance.

It's something which will be part of that hierarchy of what you fill up in order to get an outcome for a client.

We've said that to clients and advisors particularly, where we say that if you want to explain the concept of that to clients, it's easier now.

We understand an ICA allowance. The point is, use your now unquoted, because it's for unquoted business relief, use your unquoted business relief allowance. It's a much easier conversation if an advisor wants to approach it with clients. Mm-hmm. I'm just going to add one thing, if that's okay. Just very quickly in relation to the number of estates that will be affected. We had a look at clients that were on our platform. So, obviously, advise clients. We don't know what assets they've got elsewhere.

And we found it quite astounding because right now, for clients over the age of 55, around 3% of the clients that have got assets on our platform will have an IHT liability. And of course, we had to make some assumptions. But literally overnight, that jumps from 3% to 22%. And that's just assets that are on our platform. We don't know what clients have got elsewhere.

And in relation to engaging other family members, the behavioural implications, I think, that we also need to think about are, if I am now in a situation that my estate is going to be subject to IHT, but so is my parents, I'm going to ask, am I going to want those assets? No. Is there possibly going to be a scenario where, don't add to my IHT liability? So, does then skip a generation and go to the next younger generation? But then what does that mean?

And what implications will that mean? It will impact future generations. Yeah, absolutely. Absolutely. I just want two things to consider that I think are coming up. Yeah. Interesting. And it's really interesting. I know we're going on about this because it's quite an interesting topic.

But the point, and this is more intergenerational planning, which we've been discussing, but we have this conversation of when you're thinking about what assets are passing through to the next generation, have that conversation with them. Do you want these assets? And that's the point, is actually speaking to if that's the right asset to pass. And I think for the advisor, they should have that in mind, definitely on really when they're asking clients, have you spoken to your beneficiary? Do they actually want this? And that's the way of planning. And sorry, I'm going to jump. One last thing.

It's absolutely you're right. I don't know if this rings true for you, but again, commentary from advisors, there seems to be a generational sort of block, if you will, with certain people very unhappy to have those difficult conversations with their beneficiaries, either guided by an advisor or not, and those that are.

And my family's a prime example for that. But the biggest headache we're going to have on top of this is those softer skills in actually getting people and encouraging them to have the conversations regarding what happens with my assets, what happens when I pass away, how do things get distributed and split? Because that again, opens up a huge knock on intergenerational conversation. Absolutely. Yeah.

So I think we've touched on it a bit and it is such an important point as well, you know, clients communicating within their own families. But you know, what should advisors be doing on the communication and preparation front now? How can they really start to prepare for this? And what do they need to be doing perhaps now and maybe perhaps a little bit later?

Yeah, I'm jumping if that's all right. Purely, just first and foremost, we need to know where we stand as of today and where we will stand come April 20, 27 and beyond.

But unless we know what the impact is, it's going to impact our decision making. So I think first and foremost, you know, most advisors we've been speaking to are doing huge reviews of their book of business.

Is it still fit for purpose with the, you know, fill the pension up first, fill the ISA up afterwards? And how are we then going to be structuring income? But we can, we can't make any real decision until we know what we're up against. And, you know, we need to be on the front foot, most importantly. I'm sure there's lots of views on this, but we can't wait until April 20, 27. We need to be proactive in demonstrating our value or your value as advisors to the clients of saying, this is what's coming down the line. We can start preparation for it now. Absolutely.

And I think we've said this a few times now, but it's an opportunity to have meetings with your clients, cross-generational.

Again, it's about giving your clients confidence and the clarity to make sure that they don't get lost in all the noise.

Again, the FCA's retirement income data shows us those kind of knee-jerk reactions around people taking tax-free cash because of what they see in the press or people pulling money out of pensions. So, it's just really being that safe bear of hands that really translates everything for them and puts it into context as well. I mean, we touched on earlier, but it's things like stress testing, current drawdown strategies under possibly the new IHC assumptions as well.

You know, just making sure, really segmenting your client base. This is certainly something you can do going forward as a financial advisor as well.

You know, using cash flow modeling to make sure that you kind of look at and illustrate the outcome of different ways of drawing it out of the pension, whether it's drawdown or an annuity or a blended option of the two. You know, just make sure that you have those conversations and factor in, as we said, the client psychology, because I think, you know, we know that a knee-jerk reaction, pulling money out of pension, can have a huge impact over decades for the client's well-being.

And I think that's really true. There was a statistic of, there was a 61% increase in the withdrawal of tax-free cash in the 24-25 tax year compared to the prior year.

And a large portion of that was a spike before the last budget because there were rumors of it being removed. Those were just rumors. And the other combination of that is people now, when the pension rules have, or the changes that the government have said they're going to make is coming into play, trying to find ways of getting that back to IHT friendly. So I think those are quite different ways to think of it. One is based on rumor. One is based on what the government has told you they're going to do, which is very different.

But in addition to that, I think, going back to your question is, what should they be doing now? Don't act on rumor, but equally, to both your points, don't have inaction based on rumor. The government has told you they're doing this. They've gone through every step. They've issued the draft legislation.

So what you should do is not necessarily a knee-jerk reaction, but have those conversations. Start those conversations now, because you don't want to get into a position where it does come to April 27, has gone ahead, and there was no planning in place, or you've not done any actions. And I think that's really, really important. Look, if the right thing for your client is to stay where they are and take no action, then that is the right thing for your client. You've had the conversation, you've documented that risk, and it's evidence there.

And we're seeing lots of firms doing that. But I am also seeing firms taking action now, because of course, the clients that have been affected primarily, immediately, are the ones who did think they were going to be able to use this to pass it on down to the next generation.

And if they know they do not need this income, if they already know that, then they probably do need to take action. Whether they wait until immediately after post-27 is up to them, or as we've seen as the case now, many are already starting to take the PCLS out, re-wrap it, or gift it, or put it in a trust, and using that excess income gifting. So I think we're all saying a very similar thing. Look at your client bank, get segmented in that, identify the clients that are going to have the immediate issue, and start having those conversations.

But don't forget that this will evolve, because you'll have growth, and estates will grow. So there will be more clients affected over time. Yeah. And does it link to, sorry, Jane, just the point that from a financial advisor's point of view, you need to make sure that you have the holistic view of what your client's portfolio looks like, you know, not just the assets that you manage on that platform.

You know, it's so crucial now to make sure that, again, it goes back to the conversations with the client, both of them, if it's a couple, making sure that, you know, even if you don't manage at this point, any of the assets, you know, looking at, we talked about, maybe you referred to other professional connections in the past, but making sure that all of that's now pulled in, because what you use in the planning that you might have used up to this point, using pensions as an IHT shelter, is going to be turned on its head.

So it's just making sure that you have that complete and holistic view as a planner to make sure that you can re-sequence that drawing opportunities

and making sure you get the right outcomes. And potentially more difficult than it sounds as well. When, you know, you've got, you know, you mentioned 3% of the individuals currently had an IHT problem, but that might not be the only platform. They may have their own investment account that they've done. They may be a business owner, which may qualify in full or part for business relief. They may have done other outside investments.

It's, it's a bit of a minefield actually, to try and collate all of that both quoted and unquoted asset value into one centralised area.

Yeah. It's a minefield, but I think it does introduce a great opportunity. Oh, yes. Yeah, yeah, yeah. And I think, thankfully, the majority of advisors that I'm speaking to completely recognise that. Yeah, it's going to be complex and yeah, this is challenging.

Like we're all having to learn, you know, that this, this is a big evolution for every single one of us, but they're already starting to see that engagement. Just not just with the clients, but with the wider family. So, you know, it's a huge evolution, but I think with time, it hopefully will widen their client base and yeah, yeah, you know, completely for the business.

And it might seem like it's a lot, but remember, definitely upskill yourselves. But the point is, I think we've all said, just lean on those people, the professional connections, the experts, because you don't have to do it alone, essentially. So you're not alone in this really. Yeah. And then you can work together. That's very comforting.

I think we probably all need to hear that. We've spoken around sort of preparing, communicating, you know, this is an evolutionary minefield. I mean, if we think around sort of products, if we think around tools, what is there out there at the moment to help advisors prepare for this? What might we expect to see in the future?

Again, I'll go first and I'm sure there's more to add as we go around the table. For us, and I'm talking about time, we have had two real core messages that we've had from advisors is education and calculation. And what do I mean by that? It's that we've seen an influx of advisors who are not new to financial advice, but new to the world of business relief.

Rightly or wrongly, business relief is probably a bit of a sort of an ancillary, but you know, area of advice. You'd had a specialist maybe for your tax planning, a specialist for your long-term care, specialist for maybe equity release. Now, it has to be part of that conversation, even if it's disregarded as an option. So we've had a huge influx of, can you just tell me the basics? I need to re-educate. And we've done that through, again, I'm sure Octopus will say the same as, know, educational support, CPD content, working with third parties to provide generalist guides.

And then the most used opportunity we have at the moment is just IHT calculations. Again, there's many tools out there. We've got an IHT tool, most do, but it's just given me that snapshot of what impact is happening to my client now, what impact is going to have to my client in the future. I can then then make decisions from there.

But it goes back to your point. It's then building that conversation across all of the relevant product providers and solutions that you have in offer. And I think we've we haven't even touched on the professional connection side of things yet. You know, wills, powers of attorney, making sure they're all appropriately sort of redrafted and doing the right thing. But yeah, for us, it's an influx of new advisors or refreshing of education.

Absolutely. A focus for us as well. Yeah, I think I agree. It's a combination of sorts of what tools or what products are out there. So there are newer tools, exactly the same. Similar advisors wanted to hear what's the tax position now, which we many of you already have calculators for.

What's the tax position after the business relief rules come in in April 26, because actually different from pensions. And then what's the position after April 27 with pensions. So there are newer calculators we have as well. But I think there's many in the market, I'm sure some firms will have them too. Exactly.

Yeah. Which is just taking that snapshot. And there'll be more tools coming from there, not just on the IHT front, but actually perhaps on the annuity front, on the pension front, on the bonds front. There's lots of tools out there. And in terms of what products are out there, I think we've talked about this before.

It's really product innovation will come. And Octopus is actually looking at that, but actually really looking at the strategies that have been long standing for a very long time. The rules, it's just become more to the forefront because now you're having to think about it more. I was speaking to yesterday and I mentioned like necessity is the mother of all invention. Now it's causing you to look at these strategies. They've been there. So gifts out of income has increased significantly.

I know you were just discussing trusts, a large increase in trust. Business relief is coming to the forefront, which is great, but just understand these rules have been around, but understand the rules really, so you know how to apply it to your client. I think, I mean, definitely what we have seen is exactly as you said, there's not any new product evolution yet.

It's just an understanding that advisors need to start using the wider range of products that are in the market.

And, you know, we've seen bond sales increase significantly, but not just that, it's actually the use of trust planning. Because quite often, if clients do need to move that money, we refer to it as re-wrap it. You still want to have access to it, you want, but you may want to re-wrap it in another wrapper. So you can still have that access, but it's grown in an environment that's out with your estate. So getting it out that pension, getting it in something else, and unless you do want to use alternative products, and that will be right for some clients, as you've said, kind of BR, etc.

But some clients just won't want, they still, they want it for themselves. So getting that out, wrapping it in our trust is vitally important. I think what we need to remember as well, though, that we do need to think about, you know, joint life basis, second death, and the fact that, you know, we're not just projecting for five or ten years, but if you've got clients in their fifties, there's a probability that, you know, that this will be growing for the next 30 years. And how would that look?

And one last thing I'm just going to mention about this, because I think it's quite a significant change that, and I almost, it's very strange as a retirement specialist saying this, but to a degree, everything that we've always done and how we've always thought about a pension, we literally need to just do the exact opposite.

If you've got PCLS sitting on a pension, and this is increasing your estate, get it out, get it rewrapped into something where it will still grow, but it's out of your estate. So you reduce that, and you reinstate if you've lost your resident nil rate band. But I would say the same with income. And I don't mean to spend it or squander it. I just mean as well, if you need to get that pension asset down to get your estate lowered, get it out and either reinvest it or gift it if you don't need it. Yeah, absolutely.

I'm happy to add to that as well, Jane. I think at LNG, we certainly see, and we'd love to have those conversations and support financial advisors to make sure that, you know, across the breadth of this long journey that you've just spoken about, retirement, advisors are comfortable and they have the education to upskill themselves.

You know, and it's so many multiple points. If you think about, you know, again, potentially it's about using whole of life cover, which they may not have done in the past, how to make estates more more and more liquid, to give them more money to be able to pay the IHT with. It's about, unsurprisingly, my view is going to be that guaranteed income is always and should be part of any retirement income strategy. And it sits very comfortably blended into a client's retirement journey.

But in short, this proposed legislation is going to make annuities more attractive as well. And then as you move through this client's lifetime journey, you know, you have to start thinking about later life lending, you know, and again, if it's not something that you're familiar with or confident with, make sure that you reach out and have those conversations with product providers so that we can support you, bring those assets in and you can advise on that as well as care provision.

I mean, such a crucial part of, and again, goes back to the conversations that you're going to have with multiple generations in a family.

But yeah, it certainly is a cross-generational, but also cross product, if you want to, to use that word conversation and make sure that you apply all of that to get the right outcomes for your clients. I wouldn't mind touching on probably both your points on, you mentioned there about there are still products or assets out there where you would need to still pay an IHT to help to pay an IHT. So essentially,

any planning that you're doing is coming more to the front front. The timings for payment of IHT hasn't changed until six months after death, essentially.

So what we're seeing a lot of is, if I do want to find a way to get either that pension pot as a result of pension changes back to being IHT friendly, what strategies can I use that I can still access to pay that IHT bill in time? So I think that's a real important point that's coming up more. There's still a need for ensuring you can access that or the executors or personal representatives can access those funds to pay it.

And definitely the touch pensions last really is what has been the mantra for gosh knows how long it's changed really. So it's flipped it on its head.

What we're seeing now, if we're touching on the point of increased usage in certain products, again, these are long standing, but using a combination of insurance and business relief. So if people are taking money out of their pensions now, which we know isn't yet out of the estate for IHT, and they want some comfort to maybe if they're a bit of ill health, that if they do that in this time, the insurance can cover that period. And then after two years, then it's BR qualifying.

So we're seeing a little bit of that more as well, but as well as the other strategies that we've all mentioned here. Absolutely.

I think what we're all seeing is that there will be a combination of everything, you know, and you can't have not that not that advisors ever took the same approach for every client, but you kind of had the same fill your boots with ISAs, do this with your OICs, end of retirement, you leave your pension until last, and you just can't do that anymore. There's almost an argument for even with your ISA limits, if you've got clients in their 60s or their 70s, why are you utilizing the ISA limits if they're not spending it? Because all you're doing is adding to the IHT liability.

So... And I think on that note, what we may see is actually certain products which were predominantly used later on in the journey with an advisor, business relief being one of them, but others being then considered and being utilized at earlier ages.

And again, you'll have a blending. So it won't be an all or nothing. I'm only going to do life cover. I'm only going to do trust. Actually, I'll seed some business relief investment, maybe in my late 50s, early 60s. I'll also take some life cover out if I'm, you know, protecting against a gift or a pet. And then we'll be doing a combination of an as I age, a bit like, you know, lifestyle, financial planning, you'll flex onto what solutions you'll use subject to, you know, healthy life expectancy, ailments, any life changes that crop up and we could make those moves appropriately.

And can I be the first one to mention the consumer duty word in our conversation as well? But I think it is essential to make sure that that journey from a client's point of view, you know, you've mentioned foreseeable harms in the past previously.

But ultimately, you know, as you create income for that client to make sure that as you, looking from a consumer duty perspective, you have avoided foreseeable harm.

And, you know, again, looking at that behavioural aspect, we make sure that our clients don't run out of money as well as that they spend in the right way and they don't end up with a huge IHT bill on top of everything else. So I think there's those two sides of, you know, on the one hand, we want to make sure that we spend, we recognise that there's going to be a huge impact in terms of generations and what we pass on.

But it's also for those clients is making sure that you've said that, you know, nobody's suggesting clients are going to squander money, but it's about making sure that the three, four decades that they're in retirement, you know, with all the additional liabilities that come with care and are taking care of themselves throughout their retirement journey, they are actually able to fund that and go through it in a stable, in a happy way, if you know what I mean. At Allergy, we've done some research around happiness in retirement as well.

And the financial element's crucial, but it's also really crucial that clients feel, you know, confident and happy whilst going through this journey, as opposed to living in uncertainty. And I think we've said what what uncertainty does to clients in terms of their behaviour as well. Thank you.

Some really good insights there. And I think that consumer duty had to come up at some stage, didn't it?

We've got about 30 minutes left. So just a reminder to our audience, if you have questions for our panel, we will look to answer as many of these as we can. You can share them in the chat function. When sort of the summer policy proposals came through, there were a couple of changes. I do think it's worth it if we do touch on these and just talk about how relevant they might be for advisers. So, you know, we saw a decision not to include death and service benefits.

And we also saw that it's going to, you know, we're going to see a pension scheme administrator approach, which apologies, a personal representative rather than pension scheme administrator approach. So, you know, how, what, what does this sort of mean for the advisers that we'll be watching today?

So this is more focused on the administrative side of how are the government really going to be able to collect the IHT on pensions. So initially in the autumn statement, it was proposed for the pension scheme administrators. They did a consultation and if you can imagine, there was quite a bit of pushback on that. Yeah, I wrote on that and they obviously listened, but they've now put the onus or the liability to account for the IHT onto the personal representatives.

But actually, interestingly, last week, there is actually a consultation now on that itself, because I know we've been talking a lot about tax, but really, we need to understand the kind of burden this will be for personal representatives.

So the consultation at the moment that's ongoing is about that. How are they going to be able to identify, report, pay the IHT on these pensions? And if we remember, most people now move through different jobs in their careers.

You forget there's actually multiple pension pots around as well. So there's quite a difficulty here. So that's still ongoing, but it's just good for people to remember it's more about how that's going to happen as opposed to any changes in the tax itself.

Can I add one thing on the pension pot side of things as well? Again, I haven't seen the new consultation, but we're sort of again focusing on the main mainstream, if you will, with regards to big, you know, sort of the main pensions people have, DCs and so on and so forth, SIPs and SASSes as well. I mean, that's a whole other area. And if advisors are working with business owners, individuals that have maybe got their own SIP or SASS that they're utilising alongside their business, there's more liquidity in that solution.

So again, knock on effect with regards to having to pay that IHT liability. There are proposed alternatives to pay due to the liquid or deliquidity of the assets. So I just wanted to expand on the personal representative responsibility. I think this is vitally important for advisors.

And I think I've said that I am literally spending my whole life. I have been since July talking about this. And I think at first glance, advisors, or certainly the advisors that I've spoken to, I don't think they appreciate what that actually means. And it's not until you go through what they're proposing with the administrative burden, as you've said, the reality is, again, as you said, clients have more than one pot nowadays.

And the tasks that are being put on the personal representatives, I mean, who is the personal representative?

It's normally a family member. It's normally a spouse or an adult child. You know, they don't, they don't have any experience of this. So my view is that they will be heavily reliant on advisors for support.

And I think it's a significant part of the process that advisors will need to think about. Because, again, the majority of firms that I speak to right now are quite hands off in probate. They're ethically and morally, they've had the client and they will do what they can to support the beneficiary. But most do not get overly involved.

Yeah. And I think that that's now going to be the norm to get very involved. So at the end of the day, you're running a business, how are you going to be remunerated from that? Have you thought about the process or the services that you're prepared to offer? And I would say, after getting over just how complex this is, I spend more time talking about this with firms and what it means for their business than almost the other parts.

What's the knock on effect for, sorry, I was going to say, what's the knock on effect for advisor though? Because that's going to take up an awful lot of their time.

And, you know, they then need to factor in how they can service their client bank. And if that's going to eat in to a significant part of that, is there streamlining? Is there efficiencies that need to be brought into play? Again, it's just another string to the bow that advisors have to juggle. Yeah. Yeah. So I typically don't like plugging too much, but we created an intergenerational planning team specifically for that as the administrative side of when a client passes away, because it actually can be quite burdensome really.

And the amount of time it takes and you don't want when someone's passed away to add additional heartache or trouble or time and costs and so on.

So I think if you're having those conversations, I think we all are having those conversations for it as well. Yeah.

That's really important. Sorry, Kirsty, I was just going to say, if you think about the impact that that will have on that beneficiary going through that burdensome process, if you wanting to potentially make those your clients going forward and you don't have a really good process in place and assisting them, that could impact that kind of transfer of making the next generation your client. So it really is crucial that you think about that from a business point of view.

It reminds me of a tenuous link here to a story of my very first job in financial services. We watched a video on client satisfaction and it was an American video and so give them the pickle. It was about a burger and it would give a free pickle. But what I'm getting out there is that a client will remember a very good outcome, but they'll only tell one or two people.

A client that remembers a bad outcome will tell ten plus people. And that's why it will be so crucial. Yeah. You need to have a very, very slick personal service because that will cement that relationship.

Oh, absolutely. I think what they will be able to do though, so again, this is just my experience speaking to advisors. We've already acknowledged that they've realised that they'll be able to demonstrate the value that they're adding. I genuinely do think this is not just going to affect the services that they deliver when their client dies, when it's the winding up of the estate and probate. I think there's going to be a lot more planning involved at annual reviews. This is going to, you know, we've now got trust planning involved, which is quite complicated.

It's not just about, you know, a pension or single products. There's a whole tax planning angle to this. So what I've been saying to advisors is I think there's a real opportunity for you to have these conversations much earlier in the conversation. You never had an IHT liability before. You will have an IHT liability.

You know, what are we trying to achieve and how can I help you mitigate that? And let's involve your family members because then when it comes to the inevitable, actually what is going to be the best solution for them? So, and then it hopefully by doing that, it makes what we might deem to be an awkward conversation less awkward because the family have been involved much earlier.

And it also helps the process actually post -death because you've had the conversation to understand the full scope of what they have in their estate. Yeah. Which sometimes a lot after death is where where's the will? Who are the executors? Who are the bankers? What's going on? So you're having those conversations now that actually also helps with the point you were talking about of assisting the client post-death and the beneficiaries and the executors.

We kind of just focus at the moment on the clients who are in retirement or approaching retirement, but we have to also consider from, I guess, a process point of view for financial advisors, those clients before retirement, right? So again, it goes down to client segmentation, who's been pushed into potentially paying IHT and what could the potential impact be, you know, for that awful conversation, but you need to have it with your clients.

You know, what happened if you died yesterday and just now what the impact is? And yes, you know, last year, we didn't have this conversation, but because of where you live, your property price and the size of your pension, your two huge, you know, two biggest assets, potentially, you are now going to be, would have been liable to pay IHT. And that's a different conversation and to somebody who's already in retirement.

Yeah. Thank you very much, everyone. I need to move us along now. We do need to get onto our Q&A section as well. Look, I mean, we've had so many questions, honestly, on whether these changes might not even happen, whether they might happen and then very quickly get reversed. You know, what should, are you expecting that anything might change between now and April 2027 or shortly in the future? Or do advisors really need to be sort of perhaps accepting that this is going to happen?

I don't want to give a politician's answer, but clearly nobody has like a black ball to know what's going to happen in the future.

So you do need to act on the facts and circumstances that are in front of you. If we were to say what might change, obviously, we know there's a consultation on the administrative side of how to report and pay for the IHT, for the personal representative. So something might come from that.

In terms of will they or won't they change their view on the IHT position after April 27? Well, the government has told you they're doing it. They've done consultations on it. They've issued draft legislation.

Those are the facts. So I think what I would say is go with the facts. And, you know, the figures are there. They've projected for this in the OBR. So, you know, I was going to say something there, but it was probably a bit rude. They will make this happen. They need the revenue to come in from April 2027. Do I think there will be changes? I think there's possibly going to be some tweaks. I think the reality is with the admin process, I think there's going to be some complexities that possibly could be simplified. But I think by and large, what we've been told will be here.

Now, I will say that we, amongst others in the industry, lobbied the government to do something different. So just due to its complex nature, we knew it was going to have an implication for us, for advisors, but actually for the beneficiaries.

Even with this new draft legislation, it is still going to cause delays. And when we compare pension death benefits, we're not going to be able to do it as quickly as we can right now, just by its very nature. So we had lobbied for a flat rate tax. It was not a U-turn. You can call it an inheritable pension death tax.

We did all the figures. We worked with Oxford Economics. We've done all these figures that would generate the same revenue. They specifically pulled that out and a few others that had been suggested and said they're not open to alternatives. Now, you know, there's a part of me that, you know, when you hear there's, you know, practitioners possibly feeding back, could they change? I think the fact that they've come out and said in this draft legislation, they're not open to an alternative. They want to all to form part of the IHC landscape.

I think I'm going to be quite blunt. I think it's quite foolish if we think that it's not going to happen and that we have the plan for what we know. That's a bit harsh. Yeah. And financial advice is given with what we have here and now. But I mean, there's certainly, like you said, momentum and detail behind this.

And what I hear from financial planners is this preparation with, I guess, adaptability so that they're able to make tweaks as more detail comes through.

I think also a good way forward would be to make sure that when looking at clients existing portfolios that you're really comfortable understanding how certain products, let's talk about retirement income for a moment, but how they would have would be treated going forward in IHC because that would have changed as well, as we said, pensions, but annuities, for example, you know, even a joint life annuity will be outside IHC calculations. So it kind of provides that guaranteed income without adding to the estate.

So just making sure that you have the detail of all the different product ranges and how you build that to, again, get the best possible outcome for your clients. Yeah.

Fantastic. Right. So moving into the Q&A portion again, just a reminder, if you have a question for our panel, please do send it through. Our fabulous deputy editor is sitting somewhere picking out questions. Thank you, Jenna.

I'm actually going to kick off with one on annuities. So how will annuity death benefits be treated under the proposed changes? I think, Cecilia, this may well be one for you. Yeah, I've touched on it. And, you know, I'm going to again go back to the point that I've made earlier. I don't think the proposed changes are, should really make a huge difference in terms of how we use guaranteed incomes to get better outcomes for clients in retirement.

Unsurprisingly, again, my view is that it should be layered in and it can certainly help with the planning process to make sure that our clients enjoy retirement. But not only that, it gives you that underpin and means you have more flexibility with the rest of the assets in terms of how you build and what you do with us, regardless of whatever wrapper you take that to.

I think I've made the point now, but around joint annuities, you know, those are outside IHT calculations.

So that's a really important point to make. And also what that means is from when we speak about the admin and what the personal reps supposed to be doing, you know, it's not required that any calculations or anything is shown for annuities and joint life annuities as part of the estate. So that kind of takes that kind of huge burden away from personal reps as well.

We of course have fixed annuities. And just before I move on from lifetime annuities, for lifetime annuities, the moment you add any sort of death benefits onto that, that will mean again that, you know, it'll be part of as it, you know, of course, it takes that lump, that chunk of pension money out of the estate and we turn it into income. But if you added some sort of guaranteed minimum protection or value protection onto that, it pays a lump sum back into the estate and that will be part of IHT calculations going forward again.

Fixed term annuities are also there and we see, you know, more and more financial planners use those as part of the retirement income and central retirement propositions.

Those are, of course, written under drawdown rules. So you are going to have, it will be treated exactly the same as other pensions, but they have their uses and there's that income out of expenditure rule that, you know, somebody's discussed with me the other day in terms of how that could be used for something like a fixed term annuity when it comes to gifting for clients as well. So lots to think about. I have an expert team, would be very happy to support financial planners if they sit there and they want to dig into the detail a little bit more. Please reach out. Fantastic.

I've had a question in around business relief, you know, what changes have we seen in the business relief market? I think Toyin and Billy, this is probably of your rally. I'm not happy either way. I'm pretty sure. So I think Billy mentioned some of the changes with relation to unquoted business relief. So business relief currently, clearly a bit biased, both of us probably, we think it's a fantastic estate planning strategy. Hold it for two years, should be free from IHT currently.

After April 26th, the changes that we're seeing is splits now. So before it doesn't matter if it's AIM, so alternative investment market, business relief qualifying investments or unquoted, so private company shares, sole traders partnerships.

After April 26th, unquoted investments will now have a £1 million allowance which we've discussed earlier, which I actually think is helpful to cement the understanding and maybe inclined to this as an allowance. And actually everything up to a million is free from IHT over a million, it's still relief, a 50% relief.

And for AIM business relief, there is no unquoted allowance because it's not unquoted, but there is still 50% relief.

So those are the changes. And I think we have the, Billy, you know this as well, the conversation, is business relief still relevant? Well, yes, these reliefs are still really valuable. It's one of the fastest estate planning strategies out there.

Typically clients understand it because they're investments, which they understand the principle of it, just with the tax overly. And let's be honest, if you're working very clever with a husband and wife, they've got full nil rate ban, full residence nil rate ban, a million pound allowance each, which isn't transferable, we should stress, there's good planning opportunities there. You can shelter a significant sum of money outside of the estate.

What we have also seen, which again might be good to hear your thoughts on this, is that although there's been a huge interest from new advisors into business relief and the education piece and what this new allowance now means, we've obviously got a book of advisors that have been recommending this for quite some time.

They're also using this as an opportunity to review that advice. And what I mean by that is that a lot of businesses come through on a joint life basis. We now have this allowance. It is an individual allowance per person that's non-transferable. We've seen a lot of advisors restructure their business relief holdings to take the ability to utilise both that million pounds and also revisit the wills to see how that business relief is passed down.

Don't just have it going to the spouse because you will lose that benefit of having that allowance. Completely. I think that's the understanding of advisors are comfortable with knowing that the nil rate ban or residence nil rate ban is transferable.

As Billy mentioned, the unquoted allowance is not transferable. So very much again, the mantra of use it or lose it is really important. So we're seeing that as well. A lot of will structuring and also gifting. So what has not been largely publicised but is actually in the rules is that the £1 million allowance is reset every seven years. So the concept is the same as the nil rate ban resetting every seven years.

So we're seeing now people trying to max out that £1 million, gift it seven years and again again. And that ties back to the point we were mentioning earlier of starting earlier. Yeah. It's almost like we know what we're talking about.

Right. We've had a few questions in around income tax. We've picked one out of the pile. So under the new regime, pensions will be liable for IHT and then higher rates of income tax where applicable. You know, this double taxation will undo much of the incentive to continue working brought in by the abolishment of the LTA. Do you see pressure in the future to change this?

They've been pretty clear that they're not going to change it, I have to say. So they've already had, you know, various professions, industry bodies lobby to say that it's unfair. And they already responded before we got the draft legislation to say that there was no movement on that. Look, my view on it is, it is what it is. I hate that saying, right? But it is. These are the rules. We have to accept them to a degree.

You know, but we're in a situation now that if you take action with your clients, you can avoid the 40% and marginal rate tax. We cannot avoid when you strip money out of your pension to rewrap it into another product or gift it into another product for a family member. You cannot avoid paying income tax. Of course you can't.

But even at its highest rate, it's still less than the 40% plus basic rate, which is probably what's going to, which is probably what would come out on death. So it is, it is about just kind of thinking about that and planning ahead. But yeah, unfortunately, they've been pretty, they've been pretty strict. Listen, you know, as you said, we don't have a glass ball, a black ball, whatever. We don't like, we don't know. So anything could change at any time. But as it stands, they've been pretty clear they're not going to move on that. I seem to. Sorry. No, go ahead.

I was just going to say that they definitely seem to be focused on aligning, aligning pensions rather with other kind of wealth assets. So yeah, there's no indication that that's going to change. Yep. And it's not surprising that people are asking this question or advisors are asking this question, because I think the numbers vary slightly, but the effective tax rates, potentially if you die after 75, could be over 80 to 90%. So when you're adding the IHT on the pension, income tax on withdrawal, and actually the loss of the resident mail rate band is excessive.

It's ridiculous. It can be something like 93% of the pension pot is effectively eaten up. It's awful.

I've had one come through. So should we worry about the pension commencement lump sum being removed at the next budgets?

And should we be advising clients to flexibly access their PCLS? Do you know, I think we're in this situation where at no point, at least not to my knowledge, has the government indicated there's been no rumors from the government. I hate to say this, but the exact same thing happened last year. And it was media speculation.

It wasn't, you know, it wasn't driven by the government at all. And unfortunately, we saw tens of thousands of people take their PCLS out of their pension, thinking that they could cancel it and get the money back in. Now, we know that a newsletter is coming out this month. I think it's actually due tomorrow, unless it's been released today.

But that will confirm that cancellation rights are not applicable here. So I'm not going to sit here and say categorically it's not going to happen. But there's no rumors to that effect. And, you know, given that it's in legislation, they'd have to go, it would be a significant change.

I doubt very much, even if they wanted to do it, which I don't think they do. But even if they did, I doubt very much it's something that they'd be able to do overnight. They'd need to go through draft-led consultation and all the rest of it. Thank you. I think that's really important. It's just, it's still a rumor.

So we've all discussed this already. And unfortunately, the main point is don't act on rumors. You could only really act on the facts that are in front of you. So right now, it's still a rumor. Unfortunately, the data is showing us that it's happening, isn't it? That clients do every time you get near the autumn budget. You see that spike in customers and clients taking their tax-free cash. And the real point that you made as well is that it's not revocable because it wasn't an error. You chose to do this. So then now clients have this pot of money, which is now out of the pension wrapper.

So now it is back to IHT position. So now they should be finding ways or could be finding ways to manage that IHT position.

And I mean, that's fine if they can put another wrapper and put a trust around it. Or, you know, there's things that they can possibly do. But for many of them, it's not the outcome that they wanted. Exactly. And there's normally a need for that tax-free cash at some point in the future as well, which they have either accelerated the use for, or they've done it, like you say, because of knee-jerk reaction and they put themselves in a situation they didn't need to be. Yeah, put it in the bank. Really don't know what they want to do with it. Yeah. Yeah.

So I've got one coming in again on BR. So BR investment is still considered high risk. Are you as providers putting pressure on the regulator to perhaps relax us?

Actually, don't let you come in. I suppose I've got personal views on risk. And I think sometimes the problem we have is that tax, or sort of the tax vehicles we have in this marketplace, BR, EIS, VCT, they are all packaged under one big banner.

And it's probably fair to say that there's actually different risk levels with inside that. Toyin's already mentioned that these have been around an awful long time.

I know track record is no guarantee of future performance and liquidity can't be guaranteed, but a lot of the big players in this space have got a huge track record, very, very strong liquidity metrics.

And if you sort of looked at what we can do and how we do it, we're on par with some regular assets. So would we continue and want to have this considered as a product? Absolutely.

Time specifically lobbying the government? No. What we think is this is an advisor-led sale. We are an advisor-only sale for our product. We believe that it needs to be considered as a currently a high-risk product. But it is still right for the people that have an IHT liability and have either exhausted or don't want the other options on there. And I still think we will have a blend of everything. As we've said, there will be a utilisation of all of the IHT reliefs to get to as much efficiency as possible.

But I think Octopus, Time, we've got very, very strong products which have ridden the waves of 2008 and all of the economic volatility and all of the uncertainty we've had over the recent past.

And I completely agree. They are still classified as high-risk products, but it's when you're doing that research, look underneath. Look at the size of the fund, look at the manager's expertise, look at the number of qualifications they've been able to achieve for business relief. So look at the fundamentals really is what's key. There's that horrible terms in the successful deaths.

I know it sounds awful, but as you said, every BR holding is tested post-death for its ability to qualify for business relief. And if we're doing our job right, we will have 100% successful deaths, which we can both say we do. Yeah, exactly. Exactly.

And an additional layer to this, actually, which is going a bit broader than this topic, is the government, as we know, is really pushing for growth now for the whole economy.

And as part of that, they're really pushing for opening up retail investments into private markets as well. And a fantastic quote from Rachel Reeves was, we have been regulating for risk instead of regulating for growth. So she's actually tasked the FCA to start looking at the structure they've had in place for how they qualify products. This will be slightly longer term, but we will see what that might come because there's a view of trying to broaden up the investment. Yeah. And the BR marketplace, it supports the sort of a backbone of that SME marketplace, doesn't it, of the UK economy?

It's a real growth thriver. And we do need growth as a country. Exactly. And that was actually the reason business relief was introduced. Absolutely. They didn't want the businesses to be broken up to PAHT because they still contribute from employment, pay tax and so on. Mm hmm. Look, so I'm told we've had upwards, and I think this is supposed to be a conservative estimate, upwards of 80 questions in. Unfortunately, I don't think we are going to get to them all this afternoon. But what we are going to do is we are going to share your questions with our panelists.

And we on the PA team as well are going to take a look at these. And we will be producing articles around them just to make sure that you do have the opportunity to get your questions answered. We are drawing close to time now. So I do just want to say a huge thank you to our panelists, Toyin, Kirsty, Cecilia and Billy as well. Thank you very much for joining us in the studio today. Thank you. And a huge thank you to you as well for joining us. I hope it's been hugely helpful. And thank you very much.