Inheritance Tax 

Public blindspot on pensions as inheritance revealed

Public blindspot on pensions as inheritance revealed

There is a stark split between advised clients and the wider population on awareness of the advantages of leaving pensions as an inheritance – highlighting an opportunity for advisers, according to Canada Life.

Pension freedom changes, which came into force in 2015, allowed savers in many modern schemes to pass on their retirement savings pot to the next generation. 

According to a poll of 1,000 UK adults aged 55-plus, who own a property and have a pension, and 100 UK-based independent financial advisers, there is not only widespread knowledge but real enthusiasm for the changes among consumers taking financial advice.

Nine out of 10 of the financial advisers surveyed in November 2018 said their clients were aware of the changes, with 91 per cent also saying they have seen marked interest from clients in using pensions as a wealth vehicle for inheritance tax planning.

However, the poll showed awareness was much less among the general population: two-thirds (67 per cent) of those aged 55-plus weren't aware of these tax changes.

Among those earning £45,000 plus, without a financial advisers, only 41 per cent of those aged 55-plus knew about the changes.

Andrew Tully, technical director at Canada Life, said: "The disconnect in enthusiasm between advised clients and the general public shows that promoting the changes for estate planning to new prospects could reap rewards.

"Certainly, our broader consumer findings indicate an untapped market for advisers among people who are less aware of the benefits of the changes.

"The market for advice is potentially huge. Having benefited from the growth in house prices, increasing numbers of baby boomers are being dragged into the inheritance tax net. Estate planning is, or should become, a big focus for many.

"This offers an opportunity to advisers looking to expand their customer base. If people don't receive advice, many are likely to be drawn unnecessarily into the inheritance tax net."

Andrew Pennie, marketing director at Intelligent Pensions, said: "The pension freedoms have certainly put a different dimension on estate planning.

"It's captured the imagination of clients, particularly those with higher net worths, who've picked up on the fact they can pass their pension funds down in a way that wasn’t possible before.

"However, we've found that this has typically been the case for more sophisticated clients, who are more conscious of their pension savings, and possibly more attuned to these opportunities than the general public."

emma.hughes@ft.com