Shadow Chancellor Rachel Reeves has promised to end the “inheritance tax raid” on unspent pensions. This has created unprecedented opportunity for increased spending and gifting by an incredibly wealthy retiree class. This slight policy change goes into effect in April of 2027. Consequently, millions of seniors today are forced to rethink their retirement plans. Personal finance experts had predicted that millions of Americans had planned to pass along their pension nest egg to their children or grandchildren. The changes made in last October’s budget mean that this money is now liable to inheritance tax (IHT), often creating six-figure tax bills when they die.
In reaction, millions of retirees are doing all they can to stop themselves from being on the hook for these imposing tax bills. Some are opting to give large financial presents directly to their children, helping the kids buy their first homes themselves. Hundreds of thousands of travelers have seized the opportunity to make their trips great again. They want five-star hotels and they’ll book business class tickets to travel with a little more comfort.
Travel operators including Kuoni and Thomas Cook have seen a spike in interest in long-haul holidays. Saga Holidays, meanwhile, says it has seen “amazing” growth in bookings for long-haul escorted tours. The jump is remarkable 91% over last year, focusing directly on senior travelers.
The growing complexity of tax-effective withdrawals from pensions and other financial products has added to the financial planners workload. Almost every provider has been overwhelmed with requests, causing massive hold times for anyone looking to access their money.
“Many of my clients have opted to adjust their financial plans to make the most of their money now and ensure no more than is necessary ends up in the hands of the taxman,” said Ian Cook.
Anick Sharma, a financial planner at Videre Financial Planning, saw a striking pattern in his older clients. After the October announcement, most of them started to focus on near-term spending.
“One individual took his entire family (including grandchildren) to an amazing villa in Thailand for a month. Having caught up with him after, the takeaway was that you couldn’t put a price on those memories,” Sharma shared.
Even more surprisingly, some clients are buying family vacations. One current client has committed £55,000 to a once-in-a-lifetime three-week vacation to Florida next year.
“If you think about it, it was a smart move from the government, as all this money will be taxed and then spent in the economy now rather than much later,” remarked Philip Dragoumis, director and owner at Thera Wealth Management.
What Dragoumis saw was a wealthy 60-something widow. Buoyed by the prospect of avoiding a potential 40% death tax on her pension, she’s off on extravagant vacations around the world with her daughter, including in Italy and Japan.
“A looming 40% tax on her pension when she dies is now the motivation she needs,” he explained.
As Daniel Hough, director of the Graduate Financial Planning program, pointed out, these changes have significantly increased workloads for financial planners. Consequently, people experience extreme backlogs in receiving their pensions, as the volume of inquiries is enormous.
“has pushed up our workload,” Hough stated, mentioning that there are “widespread delays” because providers have been “inundated” with requests.