Advisers face a “tough job” as they balance changes to inheritance tax with the great wealth transfer, according to Jonathan Gain, CEO of Stellar Asset Management.
The chief of the tax efficient investment manager told FT Adviser more clarity was needed on inheritance tax changes from the government so advisers can help clients plan for the future.
He said: “The government needs to come out really quickly and be clear on how these arrangements will work in reality.
“Advisers have a very tough job. They need to get through thousands of clients to start making plans. They need time to do that and to digest what the impact will be.”
From April 2026, IHT relief for business and agricultural assets will be capped at £1mn: a combined cap for both agricultural and business property reliefs will apply.
And then, as of April 2027, pensions will be considered as part of one’s estate, and unused pension pots will be subject to IHT at a rate of 40 per cent, which is expected to raise nearly £1.5bn.
“Advisers have got all this to consider and it is overlaid with the great wealth transfer,” said Gain.
Vanguard estimates £7tn could be passed between generations in the coming decades.
Gain added: “We have got this huge amount of capital locked up in boomers and a huge amount of IHT pregnant in that.”
He said people being more open about money and making a plan while parents are still alive can help this.
“As a nation we are still not engaging with what we can do while we are alive,” said Gain.
“Opening up the conversation can help the next generation with plans, whether that is deposits for property or starting a business.
“Advisers have got the challenge of how to start that process. They need to start involving the families in that conversation. Advisers need to be bringing the kids and grandkids into that so a sensible plan can be made.”
Recently, a poll of advisers by Quilter found three quarters were worried about pensions becoming liable for inheritance tax.
From 2027, pensions will also be subject to IHT, adding to the complexity of estate planning.
As a result, advisers expect 38 per cent of their client book will need ‘rewrapping’ to alternative tax wrappers in the next 12 months.
tara.o’connor@ft.com
