Forty-seven per cent of advisers have reported that their clients are cutting pension contributions to invest in inheritance tax (IHT) solutions, new research by Downing has indicated.

The investment manager, which interviewed 100 UK financial advisers and wealth managers, noted the trend comes ahead of the deadline for unused pension funds being included in estates.

From April 2027, unused defined contribution pension funds will be included in estates and subject to IHT, as proposed in the Autumn Budget last year.

In Downing’s adviser study, a further 30 per cent of respondents said clients were taking money out of pensions to invest in IHT planning solutions.

Almost all (94 per cent) questioned believe the inclusion of pensions within estates will drive innovation in IHT planning solutions from providers. However, the research also found that three in four (75 per cent) advisers may need to adapt their current IHT planning for between 20 per cent and 30 per cent of their client base in response to the inclusion of pensions in estates.

Head of retail sales at Downing, Mark Dunn, commented: “The inclusion of unused pensions within estates has fundamentally reshaped the inheritance planning landscape, forcing advisers and clients alike to rethink how they balance long-term income needs with intergenerational wealth transfer.”

According to estimates from the Government, the change will raise an additional £3.44bn in IHT over its first three years of operation, with around 10,500 estates paying IHT in 2027/28 who would not have done so previously, and another 38,000 paying more IHT than they would have previously.

“The policy change is driving a wave of innovation in IHT solutions, and advisers are now treating pension pots not just as retirement income, but as strategic assets for estate planning,” added Dunn.

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