Rathbones reports surge in client queries and action ahead of pension/IHT reform

Financial planners at Rathbones have reported a sharp increase in client queries and early action ahead of unused pensions and death benefits coming into the scope of inheritance tax (IHT) from April 2027.

Clients were found to be increasingly using pensions to fund gifting and support their families earlier.

HMRC has estimated that approximately 10,500 estates will be subject to IHT for the first time due to the changes, while 38,500 are expected to pay more tax.

However, Rathbones argued these were ‘static’ estimates that did not account for shifting behaviour, such as earlier drawdown and increased gifting.

The wealth and asset management group said these behavioural shifts were already taking hold, with pensions being used more actively to generate income, often to support younger family members, alongside a broader reassessment of long-standing approaches to pensions and legacy planning.

Research from Rathbones found that 67 per cent of parents and grandparents funding private school or university costs said the change was motivating them to provide support during their lifetime.

More than a third (35 per cent) said the reform has had a strong influence on their thinking.

“We’re seeing growing interest in alternative planning routes as clients reassess how best to pass on wealth in light of the 2027 changes,” commented Rathbones financial planning director, Amanda Cook.

“In particular, there’s increased use of structures such as family investment companies and charitable giving, as clients look to balance tax efficiency with supporting family in a considered and sustainable way.

“At the same time, this is feeding into a wider shift towards simplifying financial arrangements.

“Many clients are consolidating pensions, selling buy-to-let properties or moving away from more complex structures, while also making greater use of pension income to fund gifting under surplus income rules.

“Overall, the trend is towards more flexible, forward-looking planning and making decisions earlier, rather than relying on previous assumptions.”

Rathbones chartered financial planner, Ryan Jackson, reported already seeing clients taking practical steps in response to the upcoming changes.

“In some cases, clients are taking regular lump sums from their pensions and gifting that money under the gifts out of surplus income rules as part of a structured approach to passing wealth to the next generation,” he continued.

“There’s also greater focus on how gifts are used. For example, where funds are contributed into a beneficiary’s pension, this can improve long-term tax efficiency across generations.

“Alongside this, many clients are reviewing their beneficiary nominations to ensure pensions are aligned with their wider estate plans.”

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