For at least the past 10 years, the wealth management and Financial Planning sectors have talked about the 'Great Wealth Transfer' but I’m beginning to wonder if much of that is under threat.

The transfer of wealth from the relatively well off Baby Boomer generation to younger generations has always been taken as a given, at least until now.

Many providers and wealth managers have produced endless reports on the juicy potential size of the market over the last few years. In many ways it’s been one of the main drivers of the focus on the 'at retirement' and 'retirement' markets in the advice sector.

Some clients have, until now, seen their pensions, more accurately their unused pensions, as the perfect vehicle to transfer wealth down the generations, almost tax free.

And then Rachel Reeves came along and the wheels have started to come off the trolley.

All the mood music coming from the Treasury suggests that the Chancellor is after a chunk of this wealth transfer. No clearer indication of this can be seen than in the news that the government plans to add Inheritance Tax to unused pensions on death from April 2027. IHT will be charged at 40% on any sums above the threshhold, minus any allowances.

We also had this week speculation that the tax free lump sump, the Pension Commencement Lump Sum (PCLS) as it is called, could be under threat too. Other speculation also floated recently suggests other 'wealth grab' plans are being considered, such as potentially a so-called Mansion Tax, a wider wealth tax, an extension of the income tax threshold freeze (due to end in 2028) to 2030 and so.

I should add a rider here that some of this is pure speculation and in my experience many of these rumoured changes will not happen. Speculation is rife every year in the run up to the Autumn Budget or Statement (this year expected in October or early November).

What is of concern, is that Ms Reeves seems to have backed herself into something of a spot. She faces an urgent need to raise tax to fill a fiscal black hole but with self-created red lines in force, such as no income tax rises, no VAT increases or a veto on individual National Insurance increases, things look more than a little tight.

Some of this is forcing her to consider cutting back some of the tax reliefs many have enjoyed in recent years, particularly on pensions and estates.

The tax free lump sum on pensions is one that many have appreciated as a kind of ‘pension bonus’ and it’s certainly funded more than a few cruises and new cars. But is it so wrong that a hard working person who has worked for maybe 40 or 50 years takes some of their pension cash (and it must be stressed that it’s their own cash) when they retire and enjoys spending it, a move that must boost parts of the economy.

And is it also fair to penalise middle class people for working hard, saving for a pension and accruing some wealth by the time they retire? Isn’t that the reward for all the hard work and the years of toil.

Here I should defend Ms Reeves to some extent. I don’t believe she is trying to undermine hard working people and I don’t think she wants to penalise hard work and success in general. That makes no sense.

However, if she does not want to be seen as the perpetrator of these wealth-grabbing strategies she must use her Budget to make it clear that hard work pays and successful people who create wealth and profitable businesses are people who encouraged in the UK and will not be treated as just as a source of tax revenue to be milked remorselessly.

I should add that Financial Planners, who will no doubt be dismayed by some of these changes, may also see a huge boost to advice demand as more people seek tax mitigation advice, an inevitable consequence. They may be one of the few winners.

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days.  Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin 

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