Legacy planning, IHT, evolving tax policy and the adviser’s role

With pension freedoms changing how many people think about their retirement savings, they are no longer seen as just an income in retirement but also as an opportunity to pass on any unspent pension wealth. 

The introduction of an IHT charge, though important, is unlikely to change this, Robert Plumptre, individual annuity trading and performance lead at Aviva, says.

Recently, he has been seeing two broad advice themes emerging.

1. Those pension savers who are relying on their pension pot to provide them with an income are not taking drastic action. Their savings will need to support them throughout retirement. However, many would still like their unused pension to be a legacy for future generations and are likely to put life cover in trust to protect against early death and preserve their legacy.

2. Wealthier clients who had solely intended to use their pension as a tax efficient way of passing on that wealth will see their beneficiaries face the double blow of both IHT and potentially income tax too if death is after age 75. This is prompting these clients to consider giving away those pension assets during their lifetime. 

Plumptre says: “This typically means paying income tax upfront, but IHT can be avoided, especially if the gifts satisfy the gifts out of surplus income exemption.”