Now that Pensions will be included in the IHT calculation from 2027. What's a simple way to deal with a potentially higher IHT Bill?

In the realm of financial planning and estate management, understanding the relationship between Inheritance Tax (IHT) and life insurance is crucial for individuals seeking to protect their assets and ensure their beneficiaries are adequately provided for.

Starting in 2027, pensions will be included in the IHT calculation, which will expose more individuals to the potential 40% tax bill. This tax must be paid before the beneficiaries can receive their inheritance.

The Last thing people want to do is hand over hard-earned money to HMRC. We already do enough of that in our working lives.

One of the simplest ways to address this situation is by purchasing a Whole of Life Insurance policy that covers the estimated amount of the tax bill. While these policies are guaranteed to pay out upon death, they tend to be inherently expensive.

However, a limited number of companies offer life insurance policies that cover individuals up to age 89. If you are married, you can opt for a joint life last survivor contract (written in trust), which generally comes at a lower cost than Whole of Life policies. This will pay an amount to your beneficiaries to pay any potential IHT bill.

The younger you start the policy, the cheaper it will be (subject to underwriting).

Additionally, financial advisers have the option to reduce their commission on these contracts, which can, in turn, lower the premium you pay. It’s important to discuss this option with your adviser.

If you would like more information on this topic or would like to receive a quote, please feel free to contact on the personalised advice page for a no-obligation discussion.