Retirees reshaping wealth transfer plans amid policy changes

Retirees are rethinking their wealth transfer plans as policy changes alter their behaviour around how they choose to pass on wealth, analysis from Quilter has shown.

Its Retirement Lifestyle Report found retirees in the UK were increasingly favouring passing on wealth during their lifetime, with gifting and educational support accounting for a sixth of retirees’ spend.

Based on a study of over 5,000 retirees, with analysis from the Centre for Economics and Business Research, the report revealed that the average retiree now gives £2,272 to relatives and spends a further £2,250 on education costs.

Family support accounted for 17 per cent of annual retiree spending, making it one of retirees' largest outgoings.

Quilter said the findings highlighted the growing financial role retirees are playing in supporting younger generations and demonstrated that older generations want to provide support during their lifetime.

The wealth manager added that, for advisers, the research underscored how retirement planning is becoming increasingly family oriented, with gifting, inheritance planning, retirement income and long-term financial resilience all playing a role in client decision making.

Policy changes were found to be influencing behaviour, with 39 per cent of retirees saying the current political environment was affecting their inheritance tax planning.

Just 5 per cent of retirees said they were taking no action in relation to inheritance tax, down from 38 per cent last year.

A third (33 per cent) were seeking more tax-efficient ways to save, 27 per cent were considering moving abroad, 27 per cent were using trusts, 26 per cent were putting assets into relatives’ names, and 26 per cent were gifting more to family and friends.

The report also highlighted differences between advised and non-advised retirees, with 63 per cent of advised respondents saying the current political landscape was affecting their inheritance tax planning, compared to 8 per cent of non-advised retirees.

With unused pension pots coming to the scope of inheritance tax from April, 29 per cent were planning to spend more of their pension savings during their lifetime, 26 per cent intended to gift more of their pension wealth, and 24 per cent expected to access their pension earlier than planned.

More than half (57 per cent) of retirees withdrew tax-free cash from their pension ahead of the Budget last year, including 42 per cent who did so in anticipation of rule changes.

However, almost two thirds (62 per cent) of those who withdrew tax-free cash regretted doing so.

Quilter CEO, Steven Levin, said the research showed that retirement was increasingly becoming a balancing act between retirees’ meeting their own needs and support the people they care about.

“Many retirees are choosing to help children and grandchildren through significant life events, whether that's helping with education, getting onto the property ladder or navigating periods of financial pressure,” he continued.

“The scale of that support shows the important role retirees continue to play, not just in their own households, but across the wider economy.

"At the same time, many people are making these decisions against a backdrop of economic uncertainty and significant changes to the retirement landscape, leaving many concerned about their own financial future.

“The generosity being shown by retirees can have a hugely positive impact on families and the economy, but it also highlights the importance of people having confidence in the decisions they make.

“Decisions around gifting, drawing on pension savings and passing on wealth can have consequences that last for decades, making it vital that people have the confidence to plan for the long term rather than react to short-term uncertainty.”

Levin noted that, for advisers, this presented an important opportunity to help clients understand what they can sustainably afford to give away, how policy changes could affect their plans, and how to balance supporting family today while maintaining financial resilience through retirement.

"To help support better outcomes, policymakers should focus on creating a more stable and predictable framework for retirement planning,” he argued.

“Providing greater certainty around pension tax-free cash and the long-term future of pension tax incentives, should be a matter of priority, helping to avoid the unintended but damaging consequences of Budget speculation and policy uncertainty.

“There is also a need for a sustainable long-term approach to the state pension provision and for gifting rules to be updated to better reflect modern family life.

“Alongside greater access to advice and support, these changes would give people the confidence to plan for their own future and support the next generation."

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