IHT reforms triggering ‘seismic shift’ in advice conversations

The upcoming changes to inheritance tax on unused pensions are triggering a ‘seismic shift’ in adviser conversations with clients, new research has revealed.

The study, from NextWealth and Quilter, found that the reforms, which take into effect in April 2027, are already placing pressure on advice firms, as advisers bring forward complex, time‑intensive discussions.

The findings are based on eight in-depth interviews with financial advisers, an outsourced compliance specialist and behavioural and emotional intelligence specialists, conducted in March 2026.

It shows that with implementation being less than a year away, advisers are dealing with client hesitation, emotional reactions and delayed decision‑making that are increasing both workload and risk.

What was once a relatively stable area of planning has turned into one of the most disruptive changes advisers have faced in years.

Mark Devlin: Preparing for pensions and IHT

Inaction is becoming a growing issue for advice firms too, according to the research. In practice, this is narrowing options and compressing decisions that rely on time.

The research identifies four key pressures emerging in advice firms:

• Legacy and estate planning conversations that may have been deferred for years now need to be revisited and documented.
• Large projected tax figures are triggering emotional responses that require careful reframing, often over multiple meetings.
• Firms are facing rising capacity and compliance strain as routine reviews turn into extended, judgement‑heavy planning processes.
• The risk of future challenge from family members who haven’t previously been part of the discussion.

Advisers interviewed for the paper describe situations where clients’ initial response to potential tax liabilities is to cut back spending unnecessarily or delay retirement.

In each case, advisers report needing additional meetings to ensure understanding, evidence decision‑making and balance competing risks, not just for the client, but for those who will ultimately inherit.

The paper also highlights the compliance challenge this creates. Decisions to delay action are not neutral, and advisers are increasingly conscious of how those choices may be judged in hindsight if outcomes deteriorate after April 2027.

Where beneficiaries feel surprised or disadvantaged, firms also face a heightened risk of complaint, dispute and assets ‘walking out the door’ as wealth transfers to the next generation.

As a result, many firms are adapting their advice processes, revisiting historic plans, surfacing deferred discussions and placing greater emphasis on documenting client understanding and involving family members earlier where appropriate.

What were once straightforward assumptions about pensions as a legacy asset are now being reassessed across significant proportions of adviser client banks.

The research concludes that while there is still time to act, the window for low‑disruption planning is closing.

Strategies such as gifting, restructuring assets or changing drawdown approaches cannot be compressed indefinitely, and delays increase the risk of sub‑optimal outcomes for both clients and firms.

Roddy Munro, head of technical sales at Quilter, told Money Marketing that the changes to pensions and bringing them into scope for inheritance tax is “probably one of the biggest changes, in terms of the impact on client outcomes and financial planning, that I have seen in the 30-plus years I have been doing this”.

“For me, it is far bigger than even Pension Freedoms in 2015. It completely rewrites the narrative.

“This change fundamentally alters how pensions are treated on death, and advisers are already seeing the consequences in real client behaviour. The biggest risk is not necessarily making the wrong decision, but doing nothing at all.

“When clients delay because the change feels far away, or react to headline figures without context, their options can narrow quickly. For advisers, that also raises questions about timing, judgement and how decisions are evidenced.

“The role of advice here is not just technical, but helping clients make decisions they understand and are comfortable with, before time becomes a constraint.”

Munro added: “I have just come off the phone to told me it is turning annual reviews into two or three touchpoints in order to get clients to change their behaviour and do things differently.

“As a consequence, from an adviser perspective, that affects productivity and profitability because they are having to touch things two or three times more than normal.”

Munro said that “estate planning conversations that may have been put on the back burner at every annual review now need to come to the forefront,” adding: “Advisers should not be waiting for instruction from the regulator, because they are not going to get it. They need to determine what good looks like for their clients.”

Heather Hopkins, founder and CEO of NextWealth, said: “Alongside the challenges, advisers describe a rare moment where client engagement, planning need and the value of advice are coming together.

“Clients who may previously have viewed pensions, retirement, tax and estate planning as separate issues are now seeing the benefit of a joined-up financial plan.

“This is an opportunity not only to improve client outcomes but also to strengthen relationships across generations and demonstrate the value of advice at a time when it matters most.”