Onshore bonds and trust-based planning are “moving higher up the agenda” as advisers prepare for unused pensions coming under the scope of inheritance tax.
The changes are set to come into force in April 2027 and advisers told a survey by Chesnara Life than more than a quarter of clients are already overhauling estate planning advice ahead of the measure.
The company’s Onshore Bond Adviser Sentiment Survey showed 13 per cent of advisers questioned for Chesnara Life’s said 40 per cent or more of their clients are changing their estate planning strategy now.
By the time unused DC pension funds are included in estates, advisers estimate on average that 30 per cent of clients will have amended their estate planning.
Mark Lambert, head of onshore bond distribution, Chesnara Life (UK) Ltd, said: “The inclusion of unused DC pension funds in estates from April next year is already having a significant impact on clients and advisers with many having to completely overhaul their estate planning.
“Previously for many clients, estate planning had a core focus on maximising pension investment but with that avenue being effectively blocked from April 2027, onshore investment bonds and trusts are emerging as a major alternative solution.”
The research also found 71 per cent of advisers said they expect to increase their use of onshore investment bonds with estate planning clients following the changes.
While a similar proportion, 68 per cent, anticipated making greater use of onshore investment bonds with trusts.
This compared to just 27 per cent who expected to increase their use of funds more broadly and 22 per cent who plan to rely more on cash and equity Isas.
Overall, 81 per cent of advisers questioned said IHT and estate planning had become more challenging and complex in the past two years.
Lambert added: “As estate planning becomes more complex, trust-based planning, often alongside onshore investment bonds — is moving higher up the agenda, underlining the need for more support from providers.”
“In the survey, 68 per cent of advisers said they anticipate making greater use of onshore investment bonds in conjunction with trusts for estate planning clients.”
tara.o’connor@ft.com
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