How our award-winning, later-life lending expert can help you with your Inheritance Tax planning

One area where you might not realise HFMC excels is in later-life lending.

While you may equate this specialism with old folk withdrawing funds to go on a round-the-world cruise, it can actually form a crucial part of a successful estate plan and mitigate potential Inheritance Tax (IHT) issues.

Later-life lending is a growing area of expertise, and we’re fortunate to have one of the UK’s leading experts here at HFMC. Indeed, the prestigious British Mortgage Awards recently named our specialist, Darren Johncock, as the best later-life lending broker in the UK.

Read on to find out how Darren can help you to tackle IHT planning issues, and examples of where equity release has improved a client’s liquid position.

A typical example of repaying mortgage debt from pension assets

When clients approach us, it’s normally because they have a large estate and are concerned about potential IHT issues.

Our first port of call is to work out how affordable it is for clients to make gifts of capital.

The two charts below demonstrate the approach of repaying outstanding debt from existing pension assets.

In the first chart, the black line running along the top of each column is what the expected outgoings for that client are every year. The cashflow software then “fills up” these bars using any incomes it knows about.

It begins with earnings (blue) and rental income (purple/pink) and then uses other assets where this isn’t sufficient. Cash and investments are in pale blue, pensions are in orange or pink, and State Pension income is modelled in dark blue.

The second chart demonstrates that this approach – repaying mortgages from pension funds – means the client is projected to have very little in the way of liquid assets at the end of their life.

This will potentially make it difficult for the client to fund their outgoings, should investment returns on their pensions (depicted by the green bars) not be as anticipated.

Equity release can provide an alternative approach

Instead of repaying a mortgage from pension assets, a client could consider repaying this debt using an equity release mortgage. The chart below shows the difference this approach can make.

This enables the client to maintain all their existing properties (the purple bars on the chart above) and leave a larger estate to their beneficiaries.

The chart below shows how this approach gives the client much more flexibility in how to spend their money over the long term – as demonstrated by the larger green bars.

While this scenario does play more to improving liquidity, there are two key reasons why the estate is so much larger at the end.

Firstly, the increased size of the estate will be largely due to the client maintaining their pension wealth, which, crucially, falls outside their estate for IHT purposes.

Additionally, the estate is larger because the debt that must be repaid at the end of the plan effectively reduces the value of the client’s only IHT chargeable assets – their properties.


If you’d like to find out how our award-winning later-life lending approach could benefit you and your family, please get in touch. or contact us on 01932 870 030

Please note

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Think carefully before securing other debts against your home.

Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

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