Later life advice needs to evolve ahead of the inclusion of unused defined contribution (DC) in estates, Key Equity Release has warned.
The inclusion of unused DC pensions in estates from April next year is estimated to affect 49,000 estates in the 2027/28 tax year, with 10,500 more estates receiving an IHT bill they wouldn’t otherwise have faced and the rest paying more.
Average bills attributable to the change are expected to be £34,000, according to Key.
The rule change is “a major opportunity” for advisers to review the advice they offer, with a particular focus on involving women at an earlier stage to help minimise IHT implications, the firm explained.
Government data shows female-owned estates already pay more than half (52%) of total IHT receipts, with 56% of IHT receipts paid from estates owned by surviving civil partners or those who have been widowed. With women’s higher life expectancy, Key says they must be the focus of IHT and estate planning with ongoing advice after the death of partners.
CEO Will Hale said: “The inclusion of unused DC pension funds in estates has upended IHT and estate planning with advisers and clients having to revise strategies in both the accumulation and decumulation phases along with considerations around efficient intergenerational wealth transfer.
“The change is highlighting the importance of spouses being included in the advice process and the need for explicit discussions on the planning approach to be followed after the death of a partner which, for mixed sex couples, statistics indicate will usually be the man.
“There needs to be a focus on ongoing advice for the surviving spouse potentially alongside future estate beneficiaries, to ensure the plan remains on track and any IHT implications are minimised.”
Property wealth should also be at the forefront of planning, Key said, with lenders ensuring later life lending advice is offered in their range of solutions.
Hale said: “Clients need to decide how they are going to access wealth and couples should be thinking about that together, particularly if one partner has considerably more pension wealth than the other which is often the case.
“Advisers should be including all assets, including the home, in retirement planning and offering all options to clients. Wealth managers and IFAs should consider referrals to trusted specialists in situations where their own qualifications or scope of advice may limit access to products such as modern lifetime mortgages.”
Total IHT receipts are forecast to hit £14.5 billion by the 2030/31 tax year compared with £8.5 billion in 2025/26.
One Response
The upcoming inclusion of unused pensions within estates is another reminder that strategic estate planning can’t be a “set and forget” exercise. With thousands more families expected to face unexpected IHT exposure, advisers have a responsibility to help clients review their structures, rebalance wealth between partners, and ensure plans evolve as legislation does.
What is required is a strategic approach that protects and proves its value: clear intergenerational planning, proactive spousal involvement, and a holistic view of all assets including pensions, property, and gifting options. Clients deserve advice that anticipates change rather than reacts to it.
A timely opportunity for the profession to raise standards and for families to strengthen their legacy.