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One in three UK pension holders planning to leave larger inheritance following rule changes

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New rules in the UK enabling unused pension assets to be passed on to beneficiaries free of inheritance tax, mean over a third (36 per cent) of private pension holders are now more likely to leave a larger inheritance to their children.

According to a study by Investec Wealth & Investment (IW&I), one in five (19 per cent) pension savers say they will boost the amount they are putting into their pension pots to capitalise on the fact that they can pass on these assets free of IHT under 75. One in eight (13 per cent) plan to transfer existing savings and investments such as ISAs and unit trusts into their pension.
 
IW&I’s research shows that the new rules will to lead to changes in the way that many pensioners fund their retirement. A fifth of (21 per cent) of respondents are planning to increase their reliance on a greater proportion of their non-pension assets such as ISAs for income to maintain the size of their pension pot.
 
Of those planning to spend more of their non-pension assets, the majority (76 per cent) said they would turn to their ISAs for retirement income, 43 per cent to savings accounts and a similar number (39 per cent) to stocks and shares. Nearly a quarter (23 per cent) said they would downsize property to free up equity from their home to preserve their pension pot for the next generation.
 
Nick Gartland, Senior Financial Planning Director, Investec Wealth & Investment, says: “This research underlines how the new pension freedom rules are already having a profound impact on the way that the affluent retired fund their later years.  Many of those who are fortunate to have built up a portfolio of savings and investments are turning to these ahead of their pension so the value of the latter can be preserved for the next generation. 
 
“Many people will applaud this significant measure for wealth to be passed on tax-free but with these new freedoms comes more complexity and choice. Savers shouldn’t underestimate the need for effective financial planning in light of the new rules.”
 

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