Copy article

Families urged to act quickly over pension inheritance tax rules – this advice could save you millions

ended 22. August 2025

Families have been urged to act quickly over new inheritance tax (IHT) rules on pensions due to impact them from April 2027 – with experts saying it could save millions.

The rules on pensions are expected to spark a sharp rise in the use of Deeds of Variation.

A Deed of Variation allows a beneficiary to redirect an inheritance they receive – for example from their parents – often into a discretionary trust. This has to be done within two years of the original death.

Scott Gallacher, Director at Leicester-based Rowley Turton, called for families to begin discussing this straight away.

But he says it's no easy task, with some parents even threatening to disinherit children who raise the idea.

He said: “We are now discussing Deeds of Variation with almost every client we see, as the government’s new IHT raid on pensions is dramatically increasing the number of families facing inheritance tax on their estates. 

"In many cases, this approach is creating six-figure IHT savings, as well as providing valuable protection against divorce settlements and long-term care fees for future generations. 

"Ideally, clients should be talking to their parents about leaving inheritances directly into a Discretionary Trust from the outset, avoiding the need for a Deed of Variation later. But in reality, these conversations can be challenging – some parents have even threatened to disinherit children who raise the idea.”

He added that families should be mindful of the residential nil rate band (RNRB).

Redirecting assets away from direct descendants  – for example, into a discretionary trust – may mean the estate loses some or all of the RNRB, increasing the IHT liability on the parent’s death. He urged seeking professional advice.

While there is no IHT saving on the parent’s death, the key benefit lies in protecting the next generation. 

By diverting assets into trust, children can still benefit during their lifetime, but crucially, the inheritance is not added to their own estate. This reduces the risk of an IHT charge when they eventually pass away.

Samuel Mather-Holgate, Independent Financial Adviser at Swindon-based Mather and Murray Financial, echoed the same message.

He even said they could save millions of pounds.

He said: "These deeds have been under utilised, even before the IHT changes, but the proposed super tax is bound to get people to consider things they currently hadn’t. 

"Financial planners bang on about compound interest and pound cost averaging but IHT payable generation on generations is compound interest in reverse and pound cost savaging. 

“There are some important things to consider about trusts, and it’s super important that a professional gives advice. But used wisely these could save millions of pounds on a modest estate over 3 generations.”

5 responses from the Newspage community

Copy all

Star Quote
Copy

Editor
Scott GallacherVerified
Director at Rowley Turton
We are now discussing Deeds of Variation with almost every client we see, as the government’s new IHT raid on pensions is dramatically increasing the number of families facing inheritance tax on their estates.

In many cases, this approach is creating six-figure IHT savings, as well as providing valuable protection against divorce settlements and long-term care fees for future generations.

Ideally, clients should be talking to their parents about leaving inheritances directly into a Discretionary Trust from the outset, avoiding the need for a Deed of Variation later. But in reality, these conversations can be challenging—some parents have even threatened to disinherit children who raise the idea.
Copy

Editor
David StirlingVerified
Independent Financial Adviser at Mint Wealth
As 2027 gets closer, families and advisers need to get ready for a more complicated inheritance tax system. Deeds of Variation and Trust planning will likely become more widely used, but they must be handled carefully to avoid unexpected tax issues. The most important step is to take advice early, coupled with tailored planning to make sure wealth is protected and taxes are kept under control, and family wishes are respected for future generations.
Copy

Editor
Samuel Mather-HolgateVerified
Managing Director & IFA at Mather and Murray Financial
These deeds have been under utilised, even before the IHT changes, but the proposed super tax is bound to get people to consider things they currently hadn’t. Financial planners bang on about compound interest and pound cost averaging but IHT payable generation on generations is compound interest in reverse and pound cost savaging. There are some important things to consider about trusts, and it’s super important that a professional gives advice l, but used wisely these could save millions of pounds on a modest estate over 3 generations.
Copy

Kundan BhaduriVerified
Entrepreneur, Investor and Landlord at The Kushman Group
The residential nil rate band (RNRB) trap adds a touch of sadism to an already cruel equation, you see. Redirect assets to protect your children and you might sacrifice valuable allowances on the current death, creating a perverse calculus where saving future tax costs present relief. Solicitors will feast on families forced to treat every bereavement like a corporate restructuring, weighing trust benefits against allowance losses while the funeral flowers are still fresh. Rachel Reeves has achieved something remarkable. She has made dying even more expensive than living, turning family inheritances into tax planning minefields that require professional navigation just to avoid financial ruin.
Copy

David RobinsonVerified
Co-Founder at Wildcat Law
DIY probate has become even riskier. A probate expert will be able to set up a deed of variation without risking the RNRB, carving out assets outside the property. However we expect to see a flood of botched deeds as people try to cut corners and do it themselves or turn to unregulated "advisers".
The best solutions are always to act early, for example using a life interest trust via a will.
As ever the wealthy will be able to afford to get the advice needed to minimise the impact of IHT; the poorest would love to have this problem and the increasingly pressed middle, will be left with a tough choice of paying for expensive advice or their beneficiaries paying a potentially eye watering IHT bill.