Post-budget protection opportunities

This presents a great opportunity to not only discuss the impact of those changes, but also possible protection-based solutions, as follows:

• Increase in employers NICs from April 2025 – the amount of tax relief received by a company taking out a Relevant Life policy on an employee will increase, making these one-person death-in-service arrangements more attractive. As a RLP isn’t a pension arrangement, it doesn’t fall under pension rules and so our expectation is that there is no impact from the pensions IHT proposals.
• Extension of frozen Nil Rate Bands until April 2030 – combined with rising estate values and the fact that the Chancellor said ‘6% of estates will pay IHT this year’, means the number of estates paying IHT will continue to increase, which should reinforce the continued need to do IHT planning with protection.
• Reform to business relief and agricultural relief from April 2026 – this will restrict relief to 50% for combined assets over £1 million. Relief on AIM shares will also be restricted to 50% with no threshold. Therefore, some estates are going to be faced with a higher IHT liability, which could be covered using a whole-of-life protection policy in trust.
• Increase in rate of CGT for trustees from 20% to 24% for disposals on or after 30 October 2024 – this could make investment-based solutions in trust less attractive, and therefore using a protection-based solution in trust could be an alternative.
• Unused pension funds and pensions death benefits to be included in the member’s estate for IHT purposes from April 2027 – whilst a consultation is currently taking place on this and implementation is over 2 years away, this could create a significant extra IHT liability, where the pension fund or death benefit is not left to a spouse/civil partner (and not covered by the available apportioned nil rate band). This could be covered using a whole-of-life protection policy in trust, to replace the reduced amount paid by the pension scheme, as a result of the IHT payable. Another option for those with large pension funds and do not need access to the funds and are worried about IHT, could be to drawdown on the pension and use the normal expenditure out of income allowance to cover lifetime gifts, or to fund a whole-of-life protection policy. However, as this is under consultation and not due to be implemented until April 2027, nothing should be done until final details are known, when informed advice can be given to customers, to ensure the right solution.

As protection is said to be the foundation of sound financial advice, this is also a good time to revisit customers basic protection needs, of life cover, income protection, critical illness for themselves or their children, pregnancy & early childhood cover for those expecting, plus a range of optional value-added benefits such as multi-fracture cover or our Accelerate benefit, which provides a comprehensive package of six medical services for cancer, heart and neurological conditions.

Our protection proposition can help support your advice and your customers and their families, so please speak to your Protection Consultant to find out more or contact us here.