Your Action Plan: Preparing for Pension IHT Changes and Optimising Your Estate

With the proposed significant changes to Inheritance Tax (IHT) on pensions coming into effect from April 2027, now is the time to review your financial plans. Proactive steps can help ensure your wealth is passed on as efficiently as possible and in line with your wishes.

Here are key actions you should consider taking:

• Review and Update Pension Beneficiary Nominations (Expression of Wish Forms):

    ◦ This is paramount. Your pension provider holds an "Expression of Wish" form that guides them on who should receive your pension funds upon your death. Even though pensions will become subject to IHT, ensuring your nominations are current is vital for your wishes to be considered. Without clear nominations, the process can become more complicated, and the funds might not go to your intended recipients as smoothly.

• Re-evaluate Retirement Income and Asset Decumulation Strategies:

    ◦ Think about how you plan to draw down your pension and other assets in retirement. With pensions becoming part of your taxable estate, it might make sense to prioritise drawing from pension funds first or consider other assets if your goal is IHT mitigation. This requires a comprehensive review of all your assets and how you plan to use or preserve them.

• Maximise Lifetime Gifting Opportunities Annually:

    ◦ Take advantage of the various gifting exemptions available each tax year. This includes the annual exemption of £3,000, small gifts of up to £250 per person, and making gifts from surplus income. Consistently utilising these allowances can significantly reduce the size of your estate over time, immediately moving assets outside the IHT net.

• Consider Applying for a Transitional Tax-Free Amount Certificate:

The Value of Professional Financial Advice:

Navigating these complexities and making informed decisions can be overwhelming. This is where the expertise of an independent financial adviser, like Ellie Price of Grovely Financial Limited, becomes invaluable. Here are some of the key benefits they offer:

• Holistic and Personalised Planning: An independent adviser takes the time to understand your complete financial picture—your goals, risk tolerance, family situation, and existing assets. This allows them to create a comprehensive, personalised financial plan that considers all aspects of your life, from short-term savings to long-term retirement and estate planning.

• Expert Knowledge and Objectivity: The financial landscape is constantly evolving with new regulations, products, and market trends. An adviser provides expert, up-to-date knowledge and an objective perspective, helping you avoid emotional decision-making and costly mistakes. Being independent means their advice is always in your best interest, not tied to a specific provider.

• Long-Term Goal Planning: Whether you're saving for a house, your children's education, or building a comfortable retirement, an adviser helps you set realistic goals and create a strategic roadmap to achieve them. They will regularly review your plan to ensure it remains on track, adjusting to changes in your life or the market.

• Building Financial Confidence: Many people feel overwhelmed by their finances. By working with an adviser, complex financial topics are simplified, empowering you to make informed decisions. This collaboration can significantly reduce financial stress, build your confidence, and give you peace of mind about your financial future.

• Tax Efficiency and Wealth Preservation: Advisers help you structure your finances in a tax-efficient manner, utilising tax wrappers like ISAs and pensions to maximise returns and preserve your wealth. They provide guidance on estate planning and inheritance tax, helping to ensure your assets are passed on to your loved ones in the most efficient way possible. Grovely Financial also works extensively with accountants and solicitors to provide a team approach to financial planning.

We work extensively with accountants (for tax liabilities) and solicitors (for trusts) to provide a team approach to financial planning.

Important Legal Information: It's vital to remember that the Financial Conduct Authority (FCA) does not regulate Inheritance Tax Planning, Tax, and Trustsa advice. Any guidance provided regarding tax changes will depend on your individual circumstances and may be subject to future changes. Therefore, seeking independent financial advice is crucial before making any changes to your pension or estate plan.