It’s a challenging time for advisers, as clients are understandably concerned about how including pensions in the IHT net might affect their retirement plans and their children’s financial futures.
At the same time, the final rules haven’t been confirmed, and the shape of the new system remains uncertain — making it difficult to take concrete action without relying heavily on speculation.
That said, advisers can still add value by highlighting the benefits of gifting. The usual cautions apply: don’t give away money that might be needed later, and keep the seven-year rule in mind (acknowledging there’s more nuance here). But if clients are primarily worried about tax, pensions can be a highly efficient vehicle for gifting to children.
Setting the Scene
Consider Doris — a wealthy pensioner who is already a higher-rate taxpayer. She has a substantial pension and surplus savings. Her two children, Gemma and Simon, are also successful in their careers and fall into the higher-rate tax bracket. So far, this is a fairly typical scenario.
