Use your ISA allowances
Individual Savings Accounts (ISAs) remain a cornerstone of tax-efficient investing.
Any growth within an ISA is free from Capital Gains Tax, Dividend Tax and Income Tax, and withdrawals are also tax-free.
For the 2026/27 tax year you can invest £20,000 into ISAs, while couples could potentially invest £40,000 between them each year.
Many people approaching retirement also use Junior ISAs (JISAs) for grandchildren, helping to build long-term savings for younger family members.
Regular investing still works
Even as retirement approaches, regular investing can remain an effective strategy.
Monthly contributions help build investments gradually and can smooth the impact of market movements through pound-cost averaging.
Review your pension plans
Your pension will likely play a central role in your retirement income strategy. Contributions benefit from tax relief, and for most people the Annual Allowance remains £60,000 or 100% of earnings.
Reviewing pension contributions and how they fit within your broader retirement plan can be particularly valuable at this stage.
Thinking about Inheritance Tax planning now!
You may also want to start thinking more carefully about Inheritance Tax (IHT) planning. With proposed changes to the IHT treatment of pensions from April 2027, this could be a good time to review how pensions, investments and gifting strategies fit together.
For those with larger pension pots, particularly individuals who do not rely heavily on their pension savings during retirement, it could prompt a rethink of how pensions fit within a wider estate planning strategy.
One commonly used approach has been the so-called ‘pension as the last pot’ strategy, where individuals spend other assets such as ISAs or savings first and leave their pension untouched for as long as possible. With pensions potentially becoming subject to IHT, this strategy may not always remain the most efficient option.
Instead, some individuals may wish to consider alternative approaches, such as gradually drawing on pension funds during retirement, making use of gifting allowances during their lifetime, or reviewing how their estate and beneficiaries are structured, such as exploring trusts. Using annual gifting allowances can help gradually reduce the value of your estate while supporting children or grandchildren during your lifetime.
Couples may also benefit from coordinating withdrawals and planning together to make the best use of available tax allowances.
Importantly, these changes will not come into force until April 2027, meaning pensions will continue to benefit from their current IHT treatment until then. In many cases, pensions will remain a highly tax-efficient way to save for retirement.
Nevertheless, this reform represents a significant shift in the way pensions interact with estate planning. Reviewing your arrangements well in advance can help ensure your retirement and legacy plans remain aligned with your goals.
Taking a holistic view
The start of a new tax year provides a useful opportunity to review your financial plans in the round – from retirement income planning to supporting the next generation.
A proactive review with your Finli planner could help ensure your finances remain aligned with both your lifestyle goals and your family’s future.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority does not regulate Will writing, tax and trust advice and certain forms of estate planning. Tax legislation and rates can change, and their application depends on individual circumstances.