The looming impact of inheritance tax on unused pensions from April next year is spurring a third of parents to reconsider their inheritance plans.
According to a new survey, one third of parents (29%) are mulling changes to their plans with nearly one in seven (15%) planning to prioritise enjoying their money now over leaving an inheritance to their offspring.
Almost two-fifths of UK adults (37%) expect to receive an inheritance with 9% relying on it as part of their financial plan, according to the study for Standard Life’s SKI - Spending the Kids’ Inheritance research.
Standard Life found that while many parents remain “committed” to leaving money to their children, for some, retirement is increasingly about enjoying their own money rather than saving it for the next generation.
One in seven parents (15%) plans to prioritise enjoying their money and living for today over leaving an inheritance for their children or family, according to the research. Men are almost twice as likely to prioritise enjoying the money (19%) compared to women (11%).
For many, balance is key with two fifths (44%) of parents saying they want to strike the right mix between enjoying their retirement and passing something on.
The government plans to bring unused pensions within the scope of Inheritance Tax (IHT) from April next year which will subject estates to a tax rate of 40% above existing thresholds. Previously, unused pensions have not been subject to IHT.
One in ten parents (10%) now say they are more likely to spend their pension savings during retirement rather than leave it behind, while over a fifth (22%) say they are more likely to gift money during their lifetime instead.
Nearly half of adults (48%) say they are not expecting to receive any inheritance at all.
Mike Ambery, retirement savings director at Standard Life, said: “For many families, it’s about finding the right balance between enjoying their retirement and supporting their children. With pensions also set to fall within the scope of inheritance tax from 2027, it’s understandable that some people are reassessing how they plan to use their savings and prioritising flexibility alongside longer-term planning.
“At the same time, expectations around inheritance can sometimes be built into younger people’s financial thinking. The reality is that an inheritance is never guaranteed and it can be influenced by a range of factors - and while inheritance may form part of conversations in some families, in others it may not be on the cards.”