IHT concerns bring rise in pension spending and gifting

Older people with substantial pension savings are increasingly looking at ways to spend their money rather than risk saddling relatives with additional inheritance tax (IHT) payments after their death.

Sector experts say the trend has been triggered by the government’s recent announcement that unused pensions may be subject to IHT from April 2027.

Roddy Munro, head of technical sales at wealth management specialist Quilter, says the financial planning landscape is currently undergoing “dramatic changes”.

“The inclusion of pensions within IHT will fundamentally alter how wealth is structured for inheritance,” he added. “This announcement, along with others in last year’s Autumn Budget, has shone a spotlight on the importance of estate planning, forcing many to rethink traditional IHT and retirement planning strategies.”

Speaking to The i Paper, Duncan Bailey, head of private client and charity at legal adviser Brabners Personal, said he was seeing more client interest in gifting.

“While there was once a massive disincentive to spend the money from pensions because of the IHT treatment on death, the changes from April 2027 have completely upended this. That means we’ll see people spending more while living and looking to enjoy the fruits of their savings, as well as looking for ways to treat their loved ones.

“It’s also becoming increasingly common to see grandparents or parents giving lump sums to their adult children, which can include large housing deposits to help loved ones get onto the property ladder or upsize.”

Sarah Phillips, a partner at law firm Irwin Mitchell, added: “We’ve seen a surge in clients eager to help relatives get on or move up the property ladder. It’s usually parents and grandparents stepping in, driven by the desire to assist and save on inheritance tax.”

Ms Phillips’ comments are supported by recent data from estate agency Savills, which found gifts and loans from parents used for house deposits totalled £9.3bn in 2024, up from £5bn in 2019.