The changes to inheritance tax (IHT) announced in the Autumn Budget have resulted in a “significant shift” in the advice that independent financial advisers (IFA) are giving to their clients, research from Standard Life has found.

In the Budget, the government announced that unspent pension pots were to be brought into scope of IHT from April 2027.

Standard Life found that these changes had triggered 82 per cent of IFAs to re-evaluate the role of pensions in their clients' plans, with 10 per cent undertaking a full review across their client base.

More than two thirds (69 per cent) of IFAs had either already advised or were planning to advise their clients to increase the level of income they take in retirement.

Of those who had provided such advice, 43 per cent had recommended that clients increase their retirement income by 5 per cent or more.

Standard Life’s survey revealed that the reforms had also resulted in 74 per cent of IFAs re-evaluating the role annuities play in retirement planning, with 27 per cent increasing the number of annuity purchases they are recommending.

The increase in annuity appeal was also being driven by strong annuity rates, which increased by 2.5 per cent between January and September 2024 and have remained relatively stable since.

As IFAs and their clients address the tax changes, uncertainty about future policy direction remains, with 62 per cent of IFAs expecting further changes to allowances or tax rules over the next 12 months.

“The planned extension of IHT to cover pension assets from 2027 has clearly had a profound effect on how IFAs are advising their clients, and the fact that such a large number are having conversations with their clients about increasing the level of income they take in retirement gives a clear signal as to how advisers are responding to these changes,” commented Standard Life managing director of individual retirement, Claire Altman.

“Traditionally, advisers have used a benchmark of 4 per cent when it comes to client pension withdrawals each year, and it is striking to see that they are now advising an additional 4 per cent on average, with significant numbers recommending an additional 5 per cent.

“In addition to increasing withdrawal rates for those in drawdown, advisers are also considering other means of taking an income and are turning to annuities in increasing numbers due to a combination of the certainty they provide and the attractive rates on offer.”

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