Pensions can play an important role in long-term financial planning. But with retirement changing, new pension rules on the horizon and many of us accumulating different pension arrangements during our working lives, understanding what you have and how it fits into your wider plans is increasingly important.
For Pensions Awareness Week, Cooper Parry Wealth Partner and Financial Planner Elliott Swatton has been taking a closer look at two very different areas of pension planning.
The first, looks ahead to the pension and Inheritance Tax changes coming from April 2027 and some of the considerations these could create for families, beneficiaries and those administering an estate.
The second looks at pension lifestyling, an approach commonly used within workplace pensions, why it exists and why the right approach will depend on an individual’s retirement plans and wider financial circumstances.
Here’s a round-up of both.
Your pension. Their inheritance. Who picks up the tax bill?
Changes to the Inheritance Tax treatment of pensions are due to take effect from 6 April 2027, bringing most unused pension funds and death benefits into the value of an estate for Inheritance Tax purposes.
Much of the conversation around the reforms has understandably focused on the potential tax implications.
But Elliott’s first Pensions Awareness Week article looks at another important consideration: what could the changes mean for the people responsible for administering an estate?
Pension beneficiaries and the beneficiaries of someone’s wider estate aren’t necessarily the same people. This can introduce additional considerations when establishing an estate’s overall Inheritance Tax position and dealing with the different parties involved.
It’s a useful reminder that good estate planning isn’t simply about tax. Understanding what you own, keeping information organised and making your intentions clear can all help the people who may one day have to deal with your financial affairs.
Read Elliott’s LinkedIn article: Your pension. Their inheritance. Who picks up the tax bill?
The April 2027 changes are something we’ve been following for some time. You can also explore our wider thinking in Unpacking Pensions: April 2027 and Beyond, where I look more broadly at what the changes could mean for retirement and financial planning.
IS YOUR PENSION MAKING DECISIONS WITHOUT YOU?
For his second article, Elliott turns his attention from what could happen to a pension after death to something that can happen during the years approaching retirement: pension lifestyling.
Lifestyling is an investment approach used by many workplace pension schemes. It can gradually adjust how pension savings are invested as someone moves closer to their selected retirement date.
There’s good reason for this approach. Lifestyling was developed to help manage investment risk as retirement approached and, depending on someone’s circumstances and how they intend to access their pension, it can still be entirely appropriate.
However, retirement doesn’t look the same for everyone.
People may retire gradually, remain invested during retirement, use pension drawdown, purchase an annuity or draw income from a combination of pensions and other assets.
That makes the important question less about whether pension lifestyling is inherently ‘good’ or ‘bad’, and more about whether the approach being used remains appropriate for an individual’s objectives and wider financial circumstances.
Elliott’s article explores why lifestyling exists, how retirement behaviour has evolved and some of the considerations worth understanding.
Read Elliott’s LinkedIn article: Is Your Pension Making Decisions Without You?
YOUR PENSION IS ONLY ONE PART OF THE BIGGER PICTURE
The two subjects might appear very different, but there’s a common thread running through them.
Pensions shouldn’t be considered in isolation.
How a pension is invested, how and when benefits may eventually be accessed, what other assets someone has and what they want to happen to their wealth in the future can all form part of a much wider financial plan.
There isn’t a single pension strategy that’s appropriate for everyone. Equally, changes to pension or tax rules shouldn’t automatically be a reason to make immediate changes.
Instead, Pensions Awareness Week provides a useful prompt to understand what you have, revisit your objectives and consider whether your pensions still fit alongside the rest of your financial circumstances.
KEEP THE PENSION CONVERSATION GOING
Pensions Awareness Week might only last a few days, but retirement planning is a much longer conversation.
We’ll continue sharing insights from Elliott and the wider Cooper Parry Wealth team as pension legislation, retirement behaviour and financial planning continue to evolve.
If you’d like to understand how your pensions fit into your Bigger Picture, get in touch with Elliott Swatton or the Cooper Parry Wealth team.
This article is for general information only and does not constitute financial, investment, tax or legal advice. There are no guarantees that your pension will achieve the returns you need to meet your goals. Past performance can’t guarantee what investments will do in the future. The value of a portfolio can go down as well as up, so there’s a chance you’d get back less than you put in. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action.
