IHT and pensions

The recent changes to IHT and pensions have understandably raised concerns among advisers, particularly regarding the impact on holding property within a SIPP. But is the reaction warranted, or are we seeing an unnecessary panic?

What do we know so far?

Beyond the headlines, not much. The government consultation has just finished, and now we’re in the waiting phase. The backlash from the industry has been swift and strong — perhaps one of the most vocal responses we’ve seen in recent times. But will the government listen? That remains to be seen.

If we look back at the LTA changes, it took significantly longer than expected to resolve and wasn’t nearly as complex as the potential implications of IHT on pensions. The uncertainty leaves many questions unanswered — who does what, when, and even why? Will this actually generate the expected tax revenue? Historically, many of these revenue-driven policies falter once the finer details emerge, particularly as advisers and their clients find ways to navigate the new landscape.

Should this deter property investment in SIPPs?

We don’t believe so. Here’s why:

✅ Property growth within a SIPP remains free from CGT
✅ Rent paid into the SIPP is free from Income Tax
✅ Rent paid by connected parties is typically a deductible expense
✅ Rental income can be reinvested within the SIPP

Even if the pension fund grows, potentially increasing IHT liability, is that truly a problem? A growing pension fund is, after all, a sign of financial success.

The Bigger Picture

Let’s not forget that IHT rules themselves haven’t changed, just the treatment of pensions within the system. Individuals can still pass on allowances as before, meaning this will likely affect the few rather than the many.

With sound financial planning, cash flow modelling, and up-to-date wills, property investment within a SIPP remains a viable option. Properties typically have a natural investment cycle, and most will eventually be sold down as part of a structured financial plan.

While the industry adjusts to these changes, it’s important to avoid knee-jerk reactions. Staying informed, planning strategically, and maintaining a long-term perspective will be key. At Yorsipp, we’re here to support advisers in navigating this evolving landscape and ensuring the best outcomes for your clients.