Decumulation after 2027

For a long time, many people have planned for retirement in a similar way. They kept their pension savings untouched for as long as possible, took income from other assets, and used pensions mainly as a tax-efficient way to pass money on to family. 

That approach is now starting to change. 

New tax rules expected from April 2027 will reshape how pensions are treated when someone dies. This means advisers need to think again about how retirement income plans are built, and whether existing strategies are still right for clients. 

The role of pensions is evolving

In the past, pensions often had two purposes. They provided income in retirement, but they were also used to pass on wealth because of their favourable tax treatment.

From 2027, pensions may no longer sit fully outside the inheritance tax system. In some cases, there could be inheritance tax to pay when the pension holder dies, followed by income tax when beneficiaries access the money.

This raises an important question for advisers and clients: does it still make sense to leave pension savings untouched?

For many people, the answer may be no. Instead, it may be more effective to use pensions more actively during retirement, taking income earlier and planning carefully to manage tax over time.

Tax pressures go beyond pensions

The changes to pension rules are happening alongside wider tax pressures.

Income tax thresholds are frozen. Capital gains tax allowances have reduced. Inheritance tax thresholds remain unchanged. Over time, this means more clients are likely to pay more tax, even if their circumstances stay broadly the same. And this, in turn, could affect how long their savings last.

That’s why reviewing retirement plans regularly is becoming more important than relying on decisions made at the point of retirement.

Looking at the full decumulation picture

Decumulation is no longer just about deciding which pot to draw from first. Advisers are increasingly helping clients think more broadly, including:

• How pension withdrawals affect inheritance tax later on.
• Whether giving gifts earlier, using surplus income, could help.
• The role of annuities in providing stable income and reducing uncertainty
• How different wrappers and trust structures can support income and legacy goals.

For business owners, changes to business relief rules add another layer of complexity, making forward planning even more vital.

The continuing importance of advice 

While tax rules and retirement strategies are changing, the need for good financial advice is not. 

Clients are facing more complexity and more uncertainty. Advisers play a key role in helping them balance income needs, tax efficiency and plans for family, and in adapting those plans as circumstances change. 

In a more complicated retirement landscape, clear, ongoing advice helps clients build sustainable income while protecting what matters most to them.