Case study: Pension annuities as a wealth transfer strategy

Rethinking retirement income: expert insights
To support advisers as retirement planning continues to evolve, we invited Mark Ormston, Chief Compliance Officer at Retirement Line, to write a series of articles examining how annuities and guaranteed income solutions are being used in today’s evolving retirement landscape. Drawing on real‑world adviser and customer experience, the series explores how retirement income strategies are adapting to changing markets, regulation and customer priorities.

In this case study, Mark Ormston examines how pension annuities are being reconsidered by clients with significant estates as inheritance tax reforms approach. Through a real customer example, the article explores how guaranteed lifetime income can be used not just to support retirement spending, but also as a deliberate strategy to manage estate values and enable intergenerational gifting.

Case study: Pension annuities as a wealth transfer strategy

If you saw my recent article on the growing interest in annuities for larger pension pots, you’ll know that Retirement Line are seeing a marked increase in enquiries from these customers.

Many of these are from customers who’ve already spoken to advisers about how to use annuities to mitigate the forthcoming inheritance tax (IHT) changes from April 2027.

This article uses a real Retirement Line case study to illustrate both the rising awareness among clients and the opportunity for the industry to reframe the role of annuities in later-life planning.

The customer scenario

At Retirement Line, we're seeing growing interest in annuity solutions from customers reviewing their retirement and estate planning arrangements in response to forthcoming inheritance tax changes.

A customer with significant assets and pension savings had taken a proactive approach to estate planning over many years. Their objective was to preserve as much wealth as possible for future generations while maintaining control over their financial future.

For several years, they had been contributing regularly into pension arrangements as part of this strategy. However, the Chancellor's announcement that pensions will be included within the estate for IHT purposes from April 2027 prompted concern and led them to reassess their plans.

The customer undertook detailed research and became increasingly aware of the potential impact that inheritance tax, income tax and other estate planning considerations could have on the value ultimately passed to beneficiaries.

Further research led them to an important conclusion: purchasing a pension annuity does not trigger the Money Purchase Annual Allowance. This meant they could continue contributing to their pension while also exploring ways to generate a guaranteed income that could support their wider estate-planning objectives.

Before approaching Retirement Line, the customer consulted advisory firms. Despite clearly articulating their objectives of reducing their estate, gifting from excess income and maintaining pension contributions, they felt the alternatives proposed were:

• Overly complex.
• Carrying unnecessary investment risk.
• Ineffective in sufficiently reducing their estate.

Having explored a range of options, the customer identified a pension annuity as a potential fit and approached Retirement Line for guidance.

The outcome

Following the guidance process, the customer used part of their pension savings to purchase a pension annuity, providing:

• A guaranteed income for life.
• A guarantee period that could provide ongoing benefits to beneficiaries.
• The ability to make regular gifts to family members using surplus income.
• Continued flexibility to make pension contributions as part of their wider financial planning strategy.
• Greater certainty and control over their long-term retirement and estate-planning objectives.

The customer's strategy was straightforward: use guaranteed income to support intergenerational gifting while continuing to manage their pension and estate planning arrangements in line with their long-term objectives.

A shift in mindset

As April 2027 approaches, we expect demand for this type of planning to accelerate. This case highlights a broader challenge (and opportunity) for the advice market.

We may need to reconsider the traditional reluctance toward annuities, particularly where clients:

●       have significant IHT exposure

●       value certainty over investment risk

●       want to gift from surplus income during their lifetime so they can see the benefits of their gifts.

Annuities can provide:

●       guaranteed income

●       a clear mechanism for intergenerational gifting

●       a way to actively reduce taxable estates.

Rather than leaving wealth tied up in wrappers and exposed to policy risk, clients are choosing to take control. They’re using annuities to prioritise certainty, simplicity, and visibility of outcomes.

For clients with large estates and IHT concerns, pension annuities are no longer just an income solution. They’re increasingly a strategic wealth transfer tool.

This should prompt firms to reassess their advice principles for the post April 2027 environment and review their processes to write annuities, or partner with a firm such as Retirement Line to fulfil an annuity need.

Summary

From Aviva’s perspective, this case study highlights how changing tax rules and client priorities are prompting a broader re‑evaluation of retirement income solutions. Pension annuities, long associated solely with income security, are increasingly being used as part of wider planning conversations focused on certainty, control and outcomes. As advisers prepare for the post‑2027 environment, understanding how guaranteed income can support both retirement needs and wealth‑transfer objectives will be an important part of delivering suitable, sustainable advice.