IHT Changes Are Reshaping Retirement Planning – And Property Wealth Is Moving Centre Stage

For years, defined contribution (DC) pensions have played a dual role in retirement planning, providing income in later life while also offering an efficient way to pass on wealth outside of an estate for inheritance tax (IHT) purposes.

But with unused DC pensions set to become part of estates for IHT calculations from April 2027, we are already seeing a major shift in client thinking.

Our latest research here at Key Partnerships* reveals that property wealth is increasingly being viewed as an alternative source of retirement income, allowing pension assets to potentially be preserved for beneficiaries or used more strategically within estate planning.

Advisers Expect Growing Demand for Property Wealth Solutions

According to our Adviser Perspectives Survey, nearly six out of 10 advisers (58%) say the forthcoming pension rule change is driving interest in using property wealth instead of pensions to fund retirement.

Additionally, more than a quarter (27%) of advisers told us clients are already accessing housing equity through later life lending solutions in direct response to the planned inclusion of unused DC pensions within estates.

Our findings point to a wider evolution in retirement planning – one where housing wealth is no longer viewed solely as a last-resort safety net, but as an active financial planning tool.

For many clients, the logic is straightforward. If unused pension funds may now face IHT exposure, drawing retirement income from property wealth instead could help preserve pension assets or create greater flexibility in how wealth is transferred across generations.

As a result, later life lending is increasingly becoming part of broader retirement and estate planning conversations rather than being considered in isolation.

Estate Planning Conversations Are Accelerating

Our research also highlights the growing pressure on advisers as clients reassess their estate planning strategies.

Nearly two-thirds (65%) of advisers expect inquiries about IHT and estate planning to rise over the next 12 months, with more than a quarter (27%) anticipating a substantial increase. This builds on existing momentum, with 46% already reporting higher levels of client demand over the past year.

At the same time, advisers expect the number of clients exposed to inheritance tax to increase materially once the pension changes take effect.

Currently, around a third (31%) estimate that at least 30% of their clients already face a potential IHT liability. Looking ahead, nearly two out of five (39%) believe they will see a rise of 20% or more in clients potentially affected by IHT because of the pension reforms.

Our findings suggest this is likely to bring estate planning conversations into the financial mainstream for a much broader group of clients – not just the traditionally wealthy.

Clients Are Exploring Multiple IHT Mitigation Strategies

The research suggests clients are already using a range of approaches to reduce inheritance tax exposure.

The most common strategy remains gifting, with 42% of advisers saying clients are making lump sum gifts. Around 23% report clients placing life assurance policies into trust, while 19% say trusts are being used more broadly. Business Relief and Agricultural Relief continue to play a role for some higher-net-worth clients.

However, one of the clearest themes emerging from our research is the growing role of property wealth within this conversation.

Historically, later life lending has often been associated with needs-based borrowing or improving retirement lifestyle. Increasingly, though, advisers are seeing it become part of a wider intergenerational planning strategy, helping clients balance retirement income needs with wealth preservation objectives.

Advice Firms Are Building Capability But Confidence Gaps Remain

As demand rises, many firms are reassessing how they deliver advice around later life lending and estate planning.

Our research found that 31% of advisers already have referral relationships in place with later life lending specialists, while 12% are actively looking to establish one.

This reflects growing recognition across the advice market that specialist support will become increasingly important as retirement planning, tax planning and property wealth become more interconnected.

Yet capability gaps remain. Nearly two out of five advisers (39%) admit they are not confident advising clients on later life lending in the context of IHT and estate planning.

At the same time, 15% say they do not yet have a plan in place to cope with the expected increase in demand for IHT and estate planning advice.

That creates both a challenge and an opportunity for firms seeking to broaden their proposition while ensuring clients receive specialist support in more complex planning scenarios.

In our view, referral partnerships are likely to play an increasingly important role as firms look to enhance their later life lending expertise and meet growing client demand without needing to build entirely new in-house capabilities.

A Structural Change in Retirement Planning

The inclusion of unused pensions within estates could prove to be one of the most significant estate planning changes in recent years.

And while the full impact will emerge over time, our research already points to one clear trend: property wealth is becoming a more prominent part of retirement income and intergenerational financial planning.

For advisers, that means conversations around housing equity, later life lending, inheritance tax, and retirement income are becoming increasingly interconnected.

The firms best placed to respond may be those that can combine specialist expertise, collaborative advice models, and flexible planning strategies to help clients navigate a rapidly changing landscape. As demand for specialist guidance grows, referral services such as Key Partnerships can help advisers deliver later life lending expertise as part of a broader estate planning proposition.

Our Key Partnerships Adviser Perspectives Survey interviewed 26 advisers working for firms specialising in mortgages, protection, wealth management, estate planning and general financial planning