Any links will direct to a third-party website, and Sovereign IFA Ltd is not responsible for the accuracy of the information contained within linked sites.
From 6 April 2027, most unused pensions and death benefits will fall within the scope of Inheritance Tax (IHT). This reform, along with shifting cultural expectations, is leading some people to reconsider how they use their retirement savings.
Research findings published by Financial Planning Today (19 February 2026) show that one in seven UK adults plans to “SKI” into retirement – spend the kids’ inheritance – prioritising the enjoyment of their money over leaving a legacy.
Read on to learn more about both approaches – spending and saving – to help you weigh up what’s right for you and your loved ones. Find out why having open money conversations with your family is crucial, whichever path you choose, and discover handy tips for starting the discussion.
Why you might decide to spend your children’s inheritance
Spending more of your pension, savings, and investments in retirement could allow you to enjoy the lifestyle you want after decades of work. Here are a few reasons why this approach might make sense to you:
- Your retirement could last 30 years or more – On average, people in the UK are living longer than previous generations. As such, you may need to use most or all of your resources to fund the lifestyle you want for as long as your retirement lasts, including covering later-life care costs.
- You’d prefer to see others enjoying your wealth rather than leaving a lump sum in your will – Spending some of your wealth on meaningful experiences with friends and family or funding charitable causes during your lifetime could be extremely rewarding. You might also want to support your children at specific life stages, such as buying their first home or getting married. Moreover, strategic lifetime gifting could reduce a potential IHT bill in the future.
- IHT changes could reduce the tax advantage of leaving pension funds untouched – Currently, many people preserve their pension pots as a way of passing wealth on tax-efficiently to the next generation. However, when the rules change in April 2027, you might decide that it’s more beneficial to use your pension wealth during your lifetime.
- You want to encourage your children to be more financially independent – If your loved ones are relying on receiving wealth from you, this could undermine their ambition, work ethic, or sense of financial responsibility. In contrast, letting them know there is a limit to your support could foster financial confidence and resilience.
Why you might choose to save and leave a legacy
Leaving a legacy that provides financial security for your children and grandchildren after you’re gone could give you invaluable peace of mind. This approach might appeal to you if:
- You want to give the next generation a safety net or springboard – For example, leaving funds in a trust for their education, first home, starting a business, or coping with unexpected financial shocks.
- Leaving a charitable legacy is important to you – Providing for philanthropic causes in your will could create a lasting impact beyond your family.
- You want to pass on wealth tax-efficiently – While the planned 2027 changes to IHT on pensions reduce some advantages of preserving this wealth to pass on, there are other ways to plan a tax-efficient legacy. For example, if you donate 10% or more of your net taxable estate to an eligible charity, the IHT rate on the remainder falls from 40% to 36%, easing the tax burden on your beneficiaries.
Of course, you don’t have to choose between “spend it all” and “save it all for the kids”. You might decide to adopt a hybrid approach – loosening the purse strings enough to enjoy your retirement while also making strategic lifetime gifts and leaving a modest legacy.
Talking honestly to family about your plans is crucial
However you choose to balance spending and saving, communicating your plans to loved ones is crucial. And yet, according to Today’s Wills & Probate, 25% of over-55s have never discussed inheritance with their family. This suggests that talking about money is still very much taboo in the UK.
Here’s why it’s important to have open conversations about your plans with your loved ones:
- Maintain positive family relationships – Managing expectations reduces the risk of unpleasant surprises, misunderstandings, family conflict, and legal disputes. Explaining not just what you plan to do with your money, but why, could help your family accept your decisions.
- Give your loved ones time to adapt to change – If your plans evolve over time, for example, you decide to spend more of your wealth in retirement, keeping your family in the loop allows them to adapt emotionally and practically.
- Help your family plan their finances – Research by Aviva reveals that 37% of adults say they are financially dependent on receiving an inheritance, yet only 60% know how much they’re likely to receive. By talking honestly with your children about your plans, you could prevent them from making important financial decisions based on false assumptions.
- Involve key people in carrying out your wishes – You may need some of your loved ones on board to help manage your wealth during your lifetime and after death. This could include appointing attorneys under your Lasting Powers of Attorney and choosing executors of your will.
3 helpful tips for starting a money conversation with your family
If you feel uncomfortable talking to your family about money, here are three simple ways to start the conversation:
- Choose the right time and place – Ideally a calm, private moment, and let everyone know in advance what you’d like to discuss, so they don’t feel blindsided.
- Start with your values and purpose – Launching straight into the numbers and talk of tax planning could be off-putting. Instead, focus on your “why”: the reasons behind your choices.
- Listen as much as you talk – Ask open questions to invite a collaborative discussion, rather than telling them how it is.
You might find it useful to involve an impartial third party, such as a financial planner who can answer queries about technical matters like IHT.
If you’d like our help broaching the topic or reviewing your long-term financial plans, we’d love to hear from you.
Email hello@sovereign-ifa.co.uk or call us on 01454 416653 to find out more.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, Lasting Powers of Attorney, or will writing.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Approved by Best Practice IFA Group Ltd on: 20/10/26