While some of the detail is still being worked through, this is what we know so far about upcoming regulatory changes.
Inheritance Tax (IHT) and pensions
From 6th April 2027, pensions are set to become part of a client's estate for IHT purposes. We're currently working through HMRC's technical guidance before confirming how these changes will impact our processes.
Over the next few weeks we'll share more guidance on:
- What the changes mean in practice
- New terminology, including the role of the personal representative
- How we understand the process will work
- Practical examples and what advisers need to consider
Normal Minimum Pension Age (NMPA) increases to 57
The NMPA will increase from 55 to 57 on 6 April 2028.
One group of clients who could be particularly affected by this are those born between 6th April 1971 and 5th April 1973. If these clients have already crystallised benefits and entered drawdown before 6th April 2028, they'll still be able to take income from those existing crystallised funds - however, they won't be able to crystallise any remaining uncrystallised benefits until they reach age 57.
To support these changes:
- We'll be updating our online functionality for clients who hold both crystallised and uncrystallised benefits
- Clients with a protected pension age will continue to have those protections honoured
- We'll continue to monitor developments and update our guidance as further detail becomes available
ISA changes coming in 2027
From 6 April 2027, the annual cash ISA limit will reduce from £20,000 to £12,000 for individuals under 65. The overall ISA allowance will remain at £20,000.
Alongside this change, HMRC will introduce new rules designed to stop people getting around the new cash ISA limit:
- Transfers from non-cash ISAs to cash ISAs will no longer be permitted for individuals under 65
- Introduction of a 22% charge on interest earned from uninvested cash held in a non-cash ISA. ISA managers will be responsible for calculating and paying the charge to HMRC
- An ISA invested 100% in Money Market Funds (MMF) will no longer be ISA qualifying. MMFs will remain eligible investments where they form only part of the ISA alongside other qualifying investments
We’re looking at what changes we can make to our solutions and services to help reduce the impact of the new 22% charge on cash, as well as the changes affecting MMFs. We’ll share more on our approach in the next few communications.
Consumer Duty: decumulation
The FCA's focus on retirement income continues, with firms expected to make sure they have appropriate decumulation solutions in place for clients. We'll continue to monitor and share updates and guidance as expectations evolve.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity.
Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
