Case Study: “The most rewarding case of my career”
What began as a simple pension query became one of Financial Planning Director, Andrew Barton’s, most meaningful cases. By uncovering a hidden inheritance tax risk, he helped his client protect her estate, support her daughters in real time, and turn her wealth into lasting positive impact. It’s financial planning that transforms generations.
When I first met my client, she was widowed following the sad passing of her husband at the age of 74. He had left everything to her, including his pension. It was a sizeable pot, worth around £800,000, and because she’d moved it into a beneficiary drawdown account within two years of his death, she was able to access the benefits without paying any tax.
At first glance, it looked like a straightforward situation. But once we began talking more deeply about her estate and her family, it turned into one of the most meaningful and impactful cases I’ve ever worked on.
Understanding the hidden inheritance tax risk
My client is 78. What she didn’t realise was that although the pension was tax‑free for her to access, it wouldn’t be tax‑free when she passed away. Because she is over 75, the tax position resets. Any remaining pension would be taxable for her beneficiaries when they access it, and the pension would form part of her estate for inheritance tax (IHT) purposes from next year.
When we looked at the numbers, the problem became clear:
- She was due to lose her residence nil-rate band, and that of her late husband, of £350,000 combined (£175,000 each)
- Her estate would likely face a 40% IHT charge on that
- Plus, with an £800,000 pension pot also exposed to 40% tax on death
- The total potential IHT impact was around £460,000
That’s almost half a million pounds her family could lose on wealth transfer, despite her best intentions to pass on as much of her wealth as possible.
A plan that protected her estate and transformed lives
After working through the options, I proposed a three‑part strategy:
1 Use the pension now while still tax‑free
Because my client inherited the pension before her husband turned 75, she can access it tax‑free. That won’t be the case once she dies. So, acting quickly was essential.
We arranged for her to take almost £90,000 a year from the pension through an annuity which is still tax‑free for her and this removed the pension from the estate, bringing her estate below £2,000,000 again while bringing back the residence nil-rate band.
2 Fund a whole-of-life policy to cover the future IHT liability
Part of the £90,000 income a year would go towards paying premiums for a whole‑of‑life plan designed specifically to cover the residual IHT bill. The cost was significantly lower than the tax her family would otherwise face.
3 Gift the remaining income to her three daughters
This is where the case became truly special.
After covering the insurance, my client would still have enough income to give each of her three daughters a meaningful amount of money each month. And what’s better, it would start immediately.
Her daughters aren’t wealthy individuals. They do well but feel the financial pressures as many growing families do, as she put it. One is a single parent; another has 3 children to look after. One of her grandchildren will be heading to university soon, and these funds could help pay for that.
For them, this wasn’t just a gift. It was peace of mind. Breathing space. A chance to plan futures rather than survive month to month.
What made this especially meaningful was that my client gets to see all of this while she’s still here. She told me that mattered more to her than anything else.
Whilst pensions aren’t due to form part of the estate until April 2027, my client recognised the opportunity to get this planning in place and to start benefitting from it now
I’ve advised on larger cases, and more complex ones over my career. But this one stands out because of the impact.
Not only have we:
- Fully resolved my client’s inheritance tax position
- Ensured her estate is protected for the long term
- Made use of tax‑free pension access while still available
…but we’ve improved the lives of four households. My client’s and her three daughters’.
In a time when the cost of living is rising and so many families feel stretched, creating this kind of stability and opportunity is exactly why I do this job.
The best part? My client told me she feels relief knowing she’s supported her daughters now, when they truly need it, rather than waiting for everything to pass through her estate. She can see the difference her wealth is making.
This wasn’t just financial planning. It was intergenerational planning. And being able to help deliver that, for a client who had no idea these options were available, was incredibly rewarding.
Important information
This article is for information purposes only. It is not intended as financial advice.
The scenario discussed is an example and what is right for each person will depend on individual circumstances.
Fees and charges apply.
Tax treatment depends on your individual circumstances and may be subject to change in the future.
Protection policies have no cash-in value at any time. If you don't pay your premiums on time your cover will stop, your benefits will end, and you'll get nothing back. If the benefit amount has not been paid out by the end of the selected term, the policy will end and you'll get nothing back.
Most annuities cannot be changed or cashed in once they are set up. Unless you choose death benefits, payments stop when you die. Your income may be less than the cost of the annuity, may lose value with inflation, and the income you receive depends on rates at the time of purchase.
